committee is playing in addressing the challenges posed by the global economic downturn. 2. unconventional policy measures the mpc responded to the marked deterioration in the economic outlook with an aggressive easing in monetary policy. we reduced bank rate from 5 % to an historic low of just 0. 5 % in a matter of months. moreover, at our policy meeting earlier this month, the committee agreed to finance £75 billion of asset purchases by the issuance of central bank reserves, in order to boost the supply of money and improve the functioning of corporate credit markets. the purchase ( and sale ) of assets by central banks is nothing new ; central banks have always implemented monetary policy by changing the size and composition of their balance sheets. nor, importantly, has the objective of monetary policy changed, which is to hit the government ’ s 2 % target for cpi inflation. what is different, however, is the range of assets being purchased by the bank and the scale of those purchases. given those changes, i want to explain the rationale for large scale asset purchases in the current economic climate. in doing so, i will address two key questions. first, how will asset purchases help us meet the inflation target? and second, how will we monitor the progress of the policy and assess its effectiveness? how will asset purchases help us to meet the inflation target? the objective of the asset purchase programme is to boost nominal spending in order to hit the inflation target. the tightening in the availability of credit and the collapse in confidence has led to a sharp slowing in the growth of nominal demand. the four - quarter growth rate of nominal gdp sank to a record low in the final quarter of last year. the weakness in nominal spending has been accompanied by a sharp slowdown in the growth of bank lending to firms and households and in the growth of money holdings of the non - financial sector. at our policy meeting earlier this month, the committee judged that without the additional stimulus provided by the asset purchase programme, the growth of nominal spending would be insufficient to meet the inflation objective. the mpc instructed the bank to use the additional reserves to purchase two types of assets : gilts and high - quality corporate debt. this twin - track approach allows for asset purchases to stimulate nominal spending in a variety of different ways. such a pragmatic strategy seems entirely sensible given that this in the first time these unconventional tools have been used in the uk. i find it helpful to summarise the different mechanisms through which asset purchases may boost nominal

cost in a fair and transparent manner by mainstream institutional players. reserve bank has adopted a bankled model for financial inclusion which seeks to leverage on technology. in january 2006, the bis central bankers ’ speeches reserve bank permitted banks to utilise the services of non - governmental organizations ( ngos ), micro - finance institutions ( other than non - banking financial companies ) and other civil society organisations as intermediaries in providing financial and banking services through the use of business facilitator and business correspondent ( bc ) models. the bc model allows banks to do “ cash in - cash out ” transactions at a location much closer to the rural population, thus addressing the last mile problem. reserve bank has been furthering financial inclusion in a mission mode through a combination of strategies ranging from relaxation of regulatory guidelines, provision of new products and other supportive measures to achieve sustainable and scalable financial inclusion. a structured and planned approach was followed under financial inclusion wherein all banks were advised in january 2010 to prepare board approved financial inclusion plans ( fips ) congruent with their business strategies and comparative advantage for three year period extending up to 2013. the implementation of these plans was closely monitored by the reserve bank through quantitative & qualitative reporting formats and through review meetings held with cmds / ceos and other senior officials of banks. i am sure you would like to know what was the performance of banks under the first three year financial inclusion plan period ( 2010 – 13 )? the financial inclusion plan ( 2010 – 13 ), introduced in april 2010 has concluded in march 2013. the penetration of baking services in the rural areas has increased to a great extent. a snapshot of the progress made by banks, upto december 31 2012, under fip for certain key parameters is given below : i. banking connectivity has been extended to 2, 11, 234 / – villages from 67, 694 at the beginning of the plan period. 5694 rural branches have been opened during the period. ii. numbers of business correspondents have increased from 34, 532 to 1, 52, 328. bis central bankers ’ speeches iii. total number of basic savings bank deposit accounts ( bsbdas ) have gone up from 73. 45 million in 2010 to 171. 43 million up to december 31 2012, number of kissan credit cards outstanding have gone up from 24. 31 million in 2010 to 31. 73 million upto december 31 2012 and number of general credit cards outstanding have gone up from 1. 39 million