basic products and, in addition, design new products tailored to income streams of poor bis central bankers ’ speeches borrowers and according to their needs and interests. banks must be able to offer the entire suite of financial products and services to the poor clients at an attractive pricing. though the cost of administering small ticket personal transactions is high, these can be brought down if banks effectively leverage ict solutions. this can be supplemented through product innovation with superior cost efficiency. mobile banking has tremendous potential and the benefits of m - commerce need to be exploited. v. it is important that adequate infrastructure such as digital and physical connectivity, uninterrupted power supply, etc. are available. vi. all stakeholders will have to work together through sound and purposeful collaborations to ensure appropriate ecosystem development. this would include government, both central and state, regulators, financial institutions, industry associations, technology players, corporates, ngos, shgs, civic society, etc. local and national level organizations have to ensure that these partnerships look at both commercial and social aspects to help achieve scale, sustainability and desired impact. this collaborative model will have to tackle exclusion by stimulating demand for appropriate financial products, services and advice with appropriate delivery mechanism and by ensuring that there is a supply of appropriate and affordable services available to those that need them. vii. mindset, cultural and attitudinal changes at grass roots and cutting edge technology levels of branches of banks are needed to impart organisational resilience and flexibility. banks should institute systems of reward and recognition for personnel initiating, ideating, innovating and successfully executing new products and services in the rural areas. conclusion these days, it is difficult for central bankers like us to stop talking about financial inclusion once we start, i would nevertheless restrain myself. to sum up, financial inclusion is the road which india needs to travel towards becoming a global player. an inclusive growth will act as a source of empowerment and allow people to participate more effectively in the economic and social process. banks that have global ambitions must meet local aspirations. financial access will also attract global market players to our country that will result in increasing employment and business opportunities. as we have all recognized, technology is a great enabler and has to act as a ladder to achieve the ultimate goal of providing financial services to the financially excluded. a line of caution here is that in order to serve millions of our poor villagers, what we need is “ technology with a human touch ”. banks should, therefore, take

exercise to compute “ normal credit ”, similar to the notion of potential output. the difference between the actual volume of credit and normal credit offers a measure of the “ credit gap ”, analogous to the output gap. not surprisingly, this exercise reveals that in non - stressed economies the credit gap is either insignificant or making a very small contribution to economic slack. in stressed economies, the same measure contributes to up to a third of economic slack. this analysis suggests that credit constraints are putting a brake on the recovery in stressed countries, which adds to disinflationary pressures. you can also see why the heterogeneity becomes a factor in assessing low inflation in the euro area. calibrating the policy response what is the right policy response to these developments? essentially, we are confronting three issues that might warrant a response. first, the common effect of exogenous factors, including the exchange rate, on euro area inflation. second, the asymmetric effect of endogenous developments, such as tight access to credit for parts and sectors of the euro area. and third, the risk that those effects combine to generate a more persistent regime of excessively low inflation. let me elaborate on those three issues. first, to the extent that developments in the exchange rate, money or capital markets result in an unwarranted tightening of monetary and financial conditions, this would require adjustment of our conventional instruments, so as to secure the degree of monetary accommodation intended by the governing council. at the other end of the spectrum would be a too prolonged downward departure of inflation and / or inflation expectations from our projected baseline scenario, for example due to the interaction between exchange rate developments and medium - term inflation expectations as i explained earlier. this would call for a more expansionary stance, which would be the context for a broad - based asset purchase programme. an intermediate situation is one where credit supply constraints interfere with the transmission of monetary policy and impair the effects of our intended monetary stance. this would require targeted measures to help alleviate credit constraints. i would like to dwell shortly on this contingency because it relates to the important question of whether weak credit growth results from low credit demand or supply constraints. weak credit demand in the early stages of an economic recovery is not unusual. credit growth typically lags the recovery by three to four quarters as firms draw down internal funds. but a recovery eventually results in growing credit demand. and at this point, for monetary policy to produce its full effects, there