raghuram rajan : idrbt banking technology excellence awards – governor ’ s remarks remarks by dr raghuram rajan, governor of the reserve bank of india, at the 12th idrbt ( institute for development and research in banking technology ) banking technology excellence awards function, hyderabad, 18 july 2016. * * * i congratulate all the awardees of the idrbt banking technology excellence awards. idrbt instituted these awards in the year 2001, which reflects the long road traversed by the banking sector in terms of technology adoption. the last few years have seen the convergence of various factors in the payment systems sphere, which makes possible a near - revolutionary improvement in financial access. unless we take concerted steps to address some of the challenges, however, the full potential of the opportunities may not be achieved. i intend to briefly touch upon some of these issues and challenges in my short remarks today. payments systems are the plumbing of the financial system ; so long as there is no leakage or clogging, we are unaware of their functioning. but when they do back up, the situation becomes catastrophic quickly. the reserve bank, as the regulator of payment and settlement systems in the country, develops the necessary regulatory framework, generally through a consultative process, to ensure that different types of payment systems cater to the needs of different segments of society. the aim is to ensure easy accessibility and interoperability of the payment infrastructure, while ensuring safety and security of transactions. we encourage a variety of payment channels not only because they cater to diverse needs but also because they add resilience in case some channel breaks down. banks have been the traditional gateway to payment services. however, with the fast pace of technological changes, this domain is no longer the monopoly of banks. non - bank entities are providing innovative payment products and services, forcing banks to reflect upon their strategy – to compete or to collaborate? banks may not have the wherewithal to compete effectively if they have not been investing in technology and associated personnel. however, if they collaborate without building these capabilities, they may be left with crumbs from the client while their partner takes the whole client cake. from the rbi ’ s perspective, we welcome both competition and collaboration. what we do find concerning is stasis – for instance, the long period when mobile companies and banks were not willing to work together for fear that one would capture the other ’ s clients. the licensing of payment banks has broken that logjam

those years. bis central bankers ’ speeches the simple reason for this is that indian households have begun to diversify their diets away from, predominantly, cereals to protein sources – pulses, milk, eggs, meat and fish – and vegetables and fruits. chart 3 very clearly shows the sharp increase in the price trend of protein items. chart 3 : trend in primary food prices the great consumer boom – mobile phones, television sets, air conditioners, motorcycles and other products – emerged out of sustained increases in the income levels of millions of households. there is no reason why, at relatively lower income levels, this should not be happening to food as well. in fact, the recently published consumer expenditure survey carried out by the national sample survey organisation in 2009 – 10 demonstrates how significant the shift from cereals to proteins has been in terms of its significance in household food budgets. the country went through a green revolution in the late 1960s and early 1970s, during which time cereal production was increased dramatically to satisfy demand. at this stage of development, the gap between rapidly rising demand and not - so - rapidly rising supply of proteins, vegetables and fruits have led to sustained increases in food inflation, which a good monsoon or two is simply not going to ease. just as in the case of energy, an often - raised point is that monetary policy cannot directly address food inflation, so it has no role in responding to it. the response is the same. high and rising food prices in a situation where the economy is at or close to its nirg do tend to work their way through wage contracts and, eventually, to rising prices across the board. just as in the case of energy, persistently high and rising food prices adversely impact nirg and, therefore, do warrant a monetary policy response. concluding comments it is important to highlight the fact that the central bank is the only component of the policy establishment that has an explicit mandate for price stability or inflation management. consequently, whatever other goals it may pursue, these must be aligned to this primary mandate. this uniqueness will continue to determine the future trajectory of monetary policy. however, other components of the policy establishment have mandates that may indirectly impinge on inflation. in particular, as was illustrated above with reference to food, but is also bis central bankers ’ speeches relevant to other potential bottlenecks, policy initiatives that induce additional supply help to raise nirg. this means that any given inflation rate will now be consistent with faster growth, or alternatively, any