bank of india act 1934, rbi first introduced the scheme of export financing in 1967 which was intended to make short - term working capital finance available to exporters at internationally comparable interest rates. the ecr scheme has been reviewed from time to time based on the stance of monetary policy. it has been merged with the system level liquidity provision with effect from the fortnight beginning on february 7, 2015. 19. in response to recent global crisis, a special refinance facility was introduced under section 17 ( 3b ) of the reserve bank of india act, 1934 under which all scbs ( excluding rrbs ) were provided refinance from the reserve bank equivalent to up to 1. 0 per cent of each bank ’ s ndtl as on october 24, 2008 at the laf repo rate up to a maximum period of 90 days. banks were encouraged to use this facility for the purpose of extending finance to micro and small enterprises. the eligible limit of the ecr facility for scheduled banks ( excluding rrbs ) was also increased from 15 per cent to 50 per cent of the outstanding export credit eligible for refinance at the prevailing repo rate under the laf. in order to provide liquidity support to housing, export and mse sectors, the reserve bank also provided refinance facility to the national housing bank ( nhb ), export and import bank ( exim bank ) and small industries development bank of india ( sidbi ). 20. now, in place of reserve bank, financial institutions such as national bank for agriculture and rural development ( nabard ), sidbi, and nhb, extend refinance to banks as well as nonbanking financial institutions. mudra bank, new institution for development of micro units is refinancing through state level institutions, and delivering loans to nbfcs, mfis, rural banks, district banks, nationalized banks, private banks, primary lending institutions and other intermediaries. 4 / 7 bis central bankers'speeches financial inclusion 21. the concept of “ financial inclusion ” gained global attention during the 2000s through its link with the achievement of the millennium development goals ( mdgs ) set by the united nations ( un ). the reserve bank of india has however been undertaking various initiatives over the last five decades to help the underprivileged participate in the country ’ s economic development. 22. on april 2012, india became the first bric member to join cgap 5, the

the ingredients to deliver a serious global recession. from financial crisis to a synchronised global recession in view of the strong interactions between the financial system and the real economy, a financial crisis often gives rise to an “ adverse feedback loop ”. as risk taking capacity of the banks erodes with pressure on capital, and as greater risk aversion leads to tighter credit standards, flow of money for financing real activities becomes difficult. this was seen in both money market and credit market in the advanced economies. when leading wall street banks were feared to fail, inter - bank market had to freeze, due to generalised lack of trust. the credit market, in turn, witnessed severe pressure on the capacity to lend ; moreover, the deleveraging process gathered steam over time, where everybody wanted to minimise the losses. the real economic activity decelerated as aggregate demand, particularly private consumption and investment demand shrank under the pressure of deleveraging, wealth loss associated with falling asset prices, increasing unemployment, and deteriorating climate for investment and employment. as the real effects of the financial crisis magnified over time and the initial decoupling perception turned out to be a myth, the imf revised its global growth outlook for 2009 downwards repeatedly from 3. 9 per cent in july 2008 to - 1. 4 per cent in july 2009. the volume of world trade has also been projected to contract by 12. 1 per cent in 2009. it is the serious real costs of a financial crisis that has led to large scale use of fiscal and monetary policy stimulus all over the world. in view of the adverse feedback loop in the advanced economies, policies have aimed at addressing both financial stress and the economic recession, since addressing any one would not weaken the vicious loop. lower interest rates, ample liquidity and fiscal stimulus have been used to contain the adverse real effects ; while for restoring stability to the financial system, measures like raising the capital of banks and financial institutions and addressing the impaired assets have been adopted. the indian economy before the global crisis india had emerged as a leading emerging market economy ( eme ) by the time when the subprime crisis started. the average gdp growth of 8. 8 per cent during the 5 year period 200308 was not only one of the highest in the world in the recent period, but it had also permanently raised india ’ s growth trajectory to a higher level. there was a clear structural transformation, driven by reforms, globalisation and significant increase in domestic savings and