people and alleviating poverty, about 115 million new non - farm jobs will have to be created between 2012 and 2022 and of these, about 27 million new jobs need to be created in manufacturing. the required growth rate in manufacturing sector output needs to be at least 10 per cent a year, probably higher. the national manufacturing policy envisages share of manufacturing in gdp to 25 per cent by 2022. achieving this rate of growth would require significant amount of financing by the banks. 4. against this evolving milieu of opportunistic trends, i feel it is appropriate to take stock of the challenges facing banks going forward in terms of strategies and business models that they will need to adopt more specifically from the regulatory and payment system perspectives. i intend to highlight some of the major challenges. challenges from the regulatory perspective re - orientation of the indian banking structure 5. as the economy expands, a greater quantum of resources will be needed for supporting the growth process. the indian banking sector also needs to catch up the likely acceleration in the credit to gdp ratio as the economy expands. to support the economic growth as envisaged in the 12th five year plan, the banking business needs to expand significantly to an estimated 288 trillion by 2020 from about 115 trillion in 2012 3. given this, there is a need for reorienting the banking structure to make it more dynamic and flexible, while ensuring safety and systemic stability. there is enormous scope for increasing the size and capacity of the banking structure. accordingly, the reserve bank came out with a set of guidelines for licensing of new banks in the private sector in february 2013. the process of licensing culminated with the granting of “ in - principle ” approval to two applicants who would set up new banks in the private sector within a period of 18 months. 6. while announcing the decision to grant “ in - principle ” approval to the two applicants, the reserve bank indicated that going forward, it would use the learning experience from this licensing exercise to revise the guidelines appropriately and move to grant licences more regularly on “ tap ” basis. further, reserve bank would work on a policy of having various categories of “ differentiated ” bank licences which will allow a wider pool of entrants into banking leading to greater banking penetration and more competitive environment. reserve bank has, accordingly, been working on the relevant guidelines for licensing payment banks and small banks. 7. eventually, over the years, as visualized in the discussion paper, the reoriented the banking

development, speed of transaction processing and reduction in transaction costs. in india the major issue about new technology related delivery channels is their impact on the processing of information, which lies at the core of banking business. inspite of their advantages, reliance on technology based delivery channels often exacerbates traditional risks : operational risk ( since it requires changes in procedures ), reputational risk ( if the bank fails to deliver secure, accurate and timely service ) and legal risk ( uncertainty about which legislation applies to e - banking transactions ), besides emergence of other risks ( business and credit risks ). atms still remain the most successful delivery channel followed by telephone banking and internet banking. with about 9000 off - site and on - site atms installed, banks are effectively reaching out to a large customer base at a substantially lower cost. typically, it costs close to rs. 50 per transaction if conducted in a branch and the same if done through atm costs about rs. 15. in order to reduce the cost of transaction banks have started out - sourcing and sharing of atm services and this trend will gather momentum in near future. as this delivery channel gains mass acceptability and is user friendly, the bank can use it to cross - sell its as well as others ’ products. for example, banks have already started dispensing railway tickets, movie tickets through their atms. in future a bank ’ s atm would function like a kiosk delivering more of non - cash transactions, thereby simultaneously reducing the fixed and operating cost of atm. internet banking - an emerging delivery channel - offers significant cost advantage to banks. a net - based transaction costs the bank only around rs. 4 and costs per transaction are even lower than those of an atm, mainly due to savings on prohibitive real estate costs. internet banking has failed to take off due to a combination of psychological, legal, technological and socio - economic factors. lack of critical mass of early adopters, lack of a strong trust environment, slowness in adoption of the internet, low penetration of pcs and access to internet are some of the impediments in the adoption of internet banking in india. with drastic fall in cell phone tariff and emergence of seamless connectivity between fixed and mobile lines, mobile banking is set to emerge as one of the cost - effective delivery channels in near future. toll - free - numbers would also gain popularity as an important delivery channel. although banks abroad are using call centre as a delivery channel for some time