dependent on large - scale capital imports through banking channels and was therefore hit by the reversal of capital flows. african and south american economies suffered through the huge drop in commodity prices and deterioration in their terms of trade. in india, our financial markets continued to function normally, and our financial sector remained healthy. even so, we too were hit by sudden capital flow reversals as part of the global deleveraging process and the liquidity hiccups transmitted mainly through the confidence channel. the point here is that almost every country around the world has been impacted by this crisis. text book economics tells us that stresses in non - tradable sectors remain confined to economic boundaries. many text books also cite housing as a quintessential example of a non - tradable good. it is paradoxical therefore that a problem that, at some level, traces its origins to pressures in the us sub - prime housing market should snowball into a crisis of such global dimensions. this only demonstrates the power of globalization, which is now increasingly encompassing sectors long considered non - tradable through growing communication linkages, capital flows and the depth of financial engineering – three aspects that lie at the heart of this crisis. a lot is being written about how this crisis is too important to waste, how we should learn the lessons of this crisis and go forward with schumpeterian creative destruction. some people have, however, questioned the wisdom of drawing lessons when the immediate challenge is to pull the world economy out of its tailspin. when chairman mao was asked what he thought of the french revolution, he said it was too early to say. people who take a long view of history as did chairman mao would say that it is too premature to talk about the lessons of the crisis. of course, this crisis is by no means over. there may yet be surprises. so, is it too early to raise questions? i believe it is not. the world is changing too rapidly to allow us the luxury of sitting back until after the crisis has passed to investigate its causes and draw key lessons. indeed the situation is so complex, compelling and urgent that we cannot effectively resolve it unless we start looking at everything de novo. this crisis has also been an intellectual challenge. it has thrown up a number of issues that we believed were behind us, reopened questions that we thought were answered, renewed debates that we had assumed were settled and attacked stereotype views that we had accepted without questioning. out of all this churning, lessons

) systems. 4. it is a well - accepted fact that a well - functioning payment system contributes to monetary and financial stability and ensures economic efficiency. how do you define the term “ well - functioning ”? in the emerging market context, such a system must ensure users ’ trust in these payment methods similar to the trust they have in cash transactions. there is always the “ fear of unknown ”. one bad experience in the beginning can make them rush back to cash usage. this is even a bigger challenge particularly when we are reaching out to the financially excluded to adopt electronic payments. 5. it must be appreciated that financial inclusion has been accorded high priority in policy hierarchy in recent times as the advent of technology has enabled increased reach and delivery of financial products in a cost effective and viable manner. so more appropriately what is being aimed is technology led financial inclusion. business bcg - swift “ global payments 2013 - getting business models execution right ”, september 2013. bis central bankers ’ speeches correspondents play an important role in this effort since the lack of penetration of brick and mortar bank branches could be attributed to financial exclusion. different countries have adopted different models but in any model business correspondents are important entities in the chain. further, alternate payment models are the hallmark of the fi efforts across the countries. 6. in this regard, various studies2 have shown that customers who have quick and reliable access to payment points and customers who use alternate non - cash payment methods tend to keep more funds in their accounts for larger periods of time. therefore, provision of safe, accessible and efficient alternate payment channels assumes critical importance. this is crucial for the banking systems in india when the savings and loan spreads are high. so financial inclusion makes huge commercial sense. in fact, the cgap report3 also highlights the beneficial impact of financial inclusion through increased deposit and lending to gdp ratios on national income. 7. as i have said earlier, different countries have adopted different models to achieve financial inclusion. for example, pakistan has put in place a mechanism of person - to - person funds transfer through the banking system using bcs without the need for opening accounts ; customer identification being based on national identity as well as mobile number. in india while bcs play an important role, financial inclusion aims not merely at remittances but also aims at savings product, a loan / credit product, remittance product as also insurance product. further the basis for a remittance product outside banking systems pre - supposes the