cent of anbc and focused priority sector target of 7 per cent of anbc for lending to micro enterprises, at par with domestic banks. we have adopted a graded approach while fixing priority sector targets for foreign banks with smaller banks with less than 20 branches having a target of 32 percent and foreign banks with 20 or more branches being mandated to attain a target of 40 percent. several foreign banks have expressed their firm belief in the india growth story and have shown keen interest in contributing to and actively participating in the same. if that be so, for such banks, with a larger presence in india, we would like to eliminate the regulatory arbitrage by prescribing targets similar to indian banks. mpd data of major 47 banks as on mar 23, 2012. bis central bankers ’ speeches is this necessary? 19. definitely yes. after nationalization, the task of financial inclusion was considered, primarily, to be the responsibility of public sector banks alone. however, over the years, it has become evident that public sector banks alone cannot deliver on this mandate. this is not due to a lack of willingness on their part, but due to structural inadequacies and lack of autonomy in areas such as recruitment of staff from particular locations, compensation practices, etc. in fact, i have always believed that financial inclusion in india would be brought in by foreign / private sector banks and considerable progress is being made by some of them in this regard. 20. one basic question that often arises is that what is the need for foreign banks ’ presence in india and what is the value added by their presence? it is felt that their presence is required not just for innovations in corporate finance and derivatives business, but also in areas such as agriculture and mse finance. they can draw upon their global experience to develop innovative solutions and delivery models that would deliver credit in a cost effective manner to agricultural and rural areas. this will spur the domestic banks also. as an analogy, an example of innovation that comes to my mind is computerization, which was first introduced by foreign banks in india and was, subsequently, taken up by private sector and public sector banks. the impact that this innovation has had on banking in india needs no mention. some other such areas include atms, technology banking, etc. 21. foreign banks are encouraged to open branches in the rural areas as well and to play an equal role, along with domestic banks, in lending to the priority sector. india being a growing economy, there exist enough

the process and priority sector loans are the business effect / end product of the same in the books of the banks. if we are doing financial inclusion, then these targets are achievable, if not, then these are not. the new guidelines, then, is the new mantra. we need to be consistent in our approach towards financial inclusion and priority sector lending. 34. we are happy to share with all stakeholders our logic and rationale for the new guidelines and discuss further refinements, if any, and most importantly, how can we facilitate the achievement of these guidelines and ensure its effective implementation and monitoring. in fact, just last week, we have had a round of discussion with the cmds / ceos of banks. we would, however, emphasize that the basic conceptual framework for issuing these guidelines need to be appreciated by all players so that the goal of credit linking the deserving but deprived segments of the economy is successfully accomplished. besides, as mentioned earlier, an efficient framework for extending bank finance to the vulnerable sections needs to be viewed as an essential prerequisite to attaining allocational efficiency in the economy, thereby contributing to productivity and efficiency of the banks in particular and the economy in general, which is the core objective of this summit. 35. i hope that this conference devotes some time to deliberating this important subject and comes to a common appreciation of the logic and reasoning behind these guidelines and sees them as a vehicle to improve the productivity and efficiency of the banking system. i wish the deliberations a great success. thank you. bis central bankers ’ speeches