statements or business plans also makes it difficult for potential creditors to assess the creditworthiness of mse applicants. besides, high administrative / transaction cost of lending small amounts also queers the pitch for banks insofar as mse financing is concerned. notwithstanding the merits of the reasons mentioned above, i would say that a major constraint in the banks ’ lending stems from the fact that the existing system of banks ’ credit appraisal and related processes are not geared to appraise the financial requirements of mse sector. 8. nonetheless, over the years, there has been a significant increase in credit extended to this sector by the banks. as at the end of march 2013, the total outstanding bis central bankers ’ speeches credit provided by all scheduled commercial banks ( scbs ) to the mse sector stood at rs. 6847 billion as against rs. 5276 billion in march 2012, registering an increase of 29. 77 %. despite the increase in financing to the sector there is still a considerable credit gap which needs to be bridged. in terms of the report of the private sector investment for msme sub group under working group for the 12th five year plan ( 2012 – 2017 ) the credit gap as a percentage to total demand is estimated at 56 % in 2013 – 14 for the msme sector as may be seen from the table. 9. in the absence of alternate source of funding for the sector, the role of banks is very crucial in bridging this funding gap. in this context, it is important for the banks to look beyond their existing customer base and the large corporates and to reach out to the vast number of micro and small enterprises which are presently deprived of bank credit. alongside extending the reach of their banking services, there would be a need to improve and customize the products offered, fine tune the pricing aspects and enhance the quality and efficiency of services. for this, banks need to have a proper business plan and delivery model that would harness the benefits of technology. this would help in planning product delivery and building lasting customer relationships which will translate into higher revenues. the costs of banking transactions need to be dramatically reduced just as in so many other fields such as telecom, after the advent of technology. d. need for alternate appraisal techniques 10. having appreciated the criticality of the sector in terms of its contribution to employment generation, manufacturing and exports, it is important for us to ensure that lending to the sector is appropriately stepped up. here, we need

landscapes. 15. to prepare for the future, indian banks will need to focus on digital transformation, enhance customer experience, adopt innovative technologies such as ai and blockchain, invest in cybersecurity measures, look for opportunities to derive synergistic benefits through collaboration with other players as well as upskilling their workforce to meet the demands of the digital era. additionally, they will need to prioritize risk management, regulatory compliance, and sustainability to ensure long - term resilience and competitiveness in the evolving banking landscape. conclusion 16. in conclusion, i would like to reiterate that the role of the board of directors in ensuring sustainable growth and stability of the banking sector cannot be overstated. as custodians of the interests of various stakeholders, including depositors, shareholders, regulators, and the wider society, boards must adopt a proactive and strategic approach. effective risk management, governance, and compliance practices are essential in safeguarding the bank's reputation, financial stability, and long - term viability. moreover, the board must ensure that the bank's business model, strategy, 4 / 5 bis - central bankers'speeches and operations are sustainable and create long - term value for all stakeholders. finally, the board must remain vigilant, adaptive, and continuously assess the bank's performance, risks, and opportunities, and take timely and informed decisions. i urge all board members to embrace these principles to drive the bank towards sustainable growth and stability, while safeguarding the interests of depositors and maintaining the stability and integrity of the banking system all the time. thank you. 5 / 5 bis - central bankers'speeches