are being taken by the government to promote insurance and pension sectors. while, to some extent banks can undertake the maturity transformation, to mitigate the risk of such transformation beyond acceptable limits, the only option is for government itself or government entities like iifcl to provide appropriate risk mitigants till natural long term institutional investors emerge in a big way. to come back to repos in corporate bonds, rbi has already set out the pre - conditions for allowing repos in corporate bonds : viz., an efficient and safe settlement system based on dvp and availability of fair prices. the permission to the clearing houses of the exchanges to open a transitory pooling account with the rbi is the first step taken to provide an environment for an efficient and safe settlement system. draft guidelines for allowing repos in corporate bonds will be placed shortly on rbi ’ s website for wider dissemination and comments. take out financing is one method of addressing the alm issue. some argue that take out financing has not worked because of the higher capital requirements that needs to be maintained, both by the financial entity offering the asset for takeout as also the bank financing the infrastructure. in case of organisations like iifcl offering take out, this should not be an issue. however we are having a relook at this constraint. issuance of long term bonds by banks with special incentives for investors is another suggestion that is made for addressing the problem of asset liability mismatch. while this is being examined, it needs to be mentioned that the recent introduction of the 10 year future on the exchanges can perhaps help in developing products to mitigate the interest rate risk for infrastructure projects. to conclude, there is need to address the non credit issues in agricultural credit, credit and credit plus issues in mse financing and a variety of innovative risk mitigants in infrastructure financing to make sure that the indian banking system can play its due role in capital formation in these three vital sectors of the economy so critical for sustainable inclusive growth. references reserve bank of india ( 2009 ) : annual report planning commission ( 2008 ) : 11th five year plan – 2007 - 12 government of india ( 2009 ) : economic survey, 2008 - 09, ministry of finance government of india ( 2009 ) : annual report, ministry of micro, small and medium enterprises

for 2008 - 09 resulted in write off of loans for farmers enabling them to re access the banking system. the policies have led to significant increase in share of agricultural credit to agriculture and allied gdp from 22. 7 per cent in 2004 - 05 to 33. 3 per cent in 2008 - 09. the compounded annual growth rate of agriculture credit was 28. 4 per cent during 2003 - 08 as compared to 24. 5 per cent for overall bank credit in this period. the fact that overall private capital formation in agriculture has declined during this period would suggest that most of the incremental credit has gone for production and not for investment. this is an issue which needs more study to understand the factors that are impeding private capital formation in agriculture. these would be obviously closely linked to the factors identified as impeding growth in agriculture. micro and small enterprises ( mses ) while non financial factors may be more important in the agricultural sector, in the mse sector, credit is a vital input for growth. as per the data on micro and small enterprises ( mses ) in the annual report of ministry of micro, small and medium enterprises, 2006 - 07, the sector accounted for around 39 per cent of total industrial production, 34 per cent of the exports in the industrial sector and around 35 per cent of total employment among units engaged in manufacturing and services. the sector registered a robust annual average growth in value of output, exports and employment at 16. 8 per cent, 20. 0 per cent and 4. 4 per cent, respectively during the expansionary phase of 2003 - 07, before showing signs of slowing down in 2007 - 08 particularly in respect of employment growth to 2. 9 per cent. according to the annual report of ministry of micro, small and medium enterprises, 200607, fixed investment in the sector constituted 37. 8 per cent of the value of production from the sector in 2005 - 06 ( decline sharply from 59. 9 per cent in 1999 - 2000 and 51. 6 per cent in 2002 - 03 ). credit to the sector as share of gdp of the sector however rose marginally from 55. 0 per cent in 1999 - 2000 to 56. 7 per cent in 2006 - 07. in terms of overall bank credit, credit to mses declined from 14. 5 per cent in 1999 - 2000 to 7. 2 per cent in 2006 - 07. although annual growth rate of credit to this sector was more than 20. 5 per cent in this period, credit to the