our recent policy announcements. to decide what type of action was appropriate, we had to make two key assessments. first, we had to diagnose precisely why the transmission was disrupted. and second, we had to identify the most effective policy tool to repair those disruptions, while remaining within our mandate to preserve price stability. in our analysis, a main cause of disruptions in the transmission was unfounded fears about the future of the euro area. some investors had become excessively influenced by imagined scenarios of disaster. they were therefore charging interest rates to countries they perceived to be most vulnerable that went beyond levels warranted by economic fundamentals and justifiable risk premia. clearly, it was not by chance that some countries found themselves in a more difficult situation than others. it was mainly those countries that had implemented inappropriate economic policies in the past. this is also why the first responsibility in this situation is for countries to make determined reforms and convince markets that they are credible. but many were already doing this, only for interest rates to rise even higher. there was an element of fear in markets ’ assessments that governments, acting alone, could not remove. markets were not prepared to wait for the positive effects of reforms to emerge. in our view, to restore the proper transmission of monetary policy, those unfounded fears about the future of the euro area had to be removed. and the only way to do so was to establish a fully credible backstop against disaster scenarios. bis central bankers ’ speeches we designed the omts exactly to fulfil this role and restore monetary policy transmission in two key ways. first, it provides for ex ante unlimited interventions in government bond markets, focusing on bonds with a remaining maturity of up to three years. a lot of comments have been made about this commitment. but we have to understand how markets work. interventions are designed to send a clear signal to investors that their fears about the euro area are baseless. second, as a pre - requisite for omts, countries must have negotiated with the other euro area governments a european stability mechanism ( esm ) programme with strict and effective conditionality. this ensures that governments continue to correct economic weaknesses while the ecb is active. the involvement of the imf, with its unparalleled track record in monitoring adjustment programmes would be an additional safeguard. the consequences of the ecb ’ s actions so what are the likely consequences of the ecb ’ s actions? before announcing the omt programme, we

, which brings down the credit score of the entrepreneur and hinders the ability of the formal financial system to lend to them. banks, on their part will need to leverage on modern technology algorithms and big data so that they can differentiate between a good borrower and a not so good one even in the absence of conventional documentation. 17. having analysed various impediments in finance to the sector let me dwell on some of the steps taken by rbi, government of india and other apex institutions in bridging these gaps. ( i ) access / availability rbi has initiated several measures to improve the availability of banking services, especially in the rural and far - flung areas where access to formal finance is arduous. 18. new institutions : as you are aware, two new universal banks have started operations while in - principle approval has been granted to 10 entities to set up small finance banks that would primarily focus on lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities. these small finance banks have been mandated to extend 75 per cent of its adjusted net bank credit ( anbc ) to the sectors eligible for classification as priority sector lending ( psl ) by the reserve bank. at least 50 per cent of its loan portfolio should constitute loans and advances of up to rs. 25 lakh. many of the sfbs have prior experience of working with small bis central bankers ’ speeches businesses as mfis / nbfcs and we believe that they will be able to bring in technology backed innovative last mile practices to serve their customers. 19. increased branch penetration / specialized branches : rbi has advised banks to set up ‘ brick and mortar ’ branches in villages with population of more than 5000 in a phased manner. coupled with a more mature banking correspondent mechanism, this would give considerable fillip in meeting the banking needs of the msmes particularly in rural areas. besides, creating presence of physical branch, there is also a need to have large number of bank officials with appropriate skill sets and knowledge to handle the life cycle needs of the small businesses. already, public sector banks have established specialized msme branches in every district to cater to the needs of the small businesses. we are already working towards improving the skill sets and entrepreneurial sensitivity of the field level functionaries. 20. p2p lending : new players have entered the msme lending landscape in form of p2p companies. these entities use an