and more pertinently further deepening of financial inclusion. thus, the goal for small finance banks is not'small '. on the contrary, it is very significant, as sfbs play a crucial role in extending financial services to the underserved, fostering entrepreneurship, and driving inclusive growth that will be essential for india's progress towards becoming a high - income economy. 1 / 5 bis - central bankers'speeches in a developing country like india, it is imperative for the financial sector, including small finance banks to strike a balance between profitability and social objectives. this can be achieved through a strategic focus on sectors that deliver high social impact, ensuring that financial growth is aligned with the broader goal of inclusive development. it is therefore essential for sfbs to actively participate in extending credit under various government sponsored schemes to promote greater accessibility of affordable credit, especially among the vulnerable sections of the society. as the target group of such lending is mostly the marginalised and underserved sections of the society, it is essential for the sfbs to adopt responsible lending practices. it is disheartening to come across egregious practices by some sfbs, such as charging excessive interest rates, collecting instalments in advance as well as not adjusting such advance collections against loan outstanding, levying of usurious fees, etc. it is also observed that grievance redressal mechanism is far from adequate in most sfbs. i therefore feel that periodically reviewing how your bank is fulfilling its financial inclusion objectives is an area that boards should give much deeper consideration to. it is not just about meeting regulatory requirements such as priority sector lending but also about assessing the true impact of your efforts on underserved communities. boards can reflect on whether the bank is genuinely reaching marginalised groups, such as low - income households, small businesses, and rural populations, and how effectively it is using technology and innovative products to bridge financial gaps, as these were the objectives of having a differentiated licensing for sfbs. strengthening governance an effective governance framework is the foundation of resilient and well managed institutions, especially in the context of banks. there needs to be a clear division of responsibilities between the board and the management to ensure smooth functioning of the bank. while the board is responsible for setting the overall strategic direction, establishing policies, and ensuring that the bank adheres to regulatory frameworks and ethical standards, the management is responsible for the execution of the board's strategy and operations. it is the

willing to bet that, despite the relatively slow pace of change in retail payments over the past several decades and despite americans ’ long - standing affection for the convenience, flexibility and familiarity of the paper check, we are likely to get to some sort of tipping point early in the next century ( less than a decade from now ) after which electronic retail payments quite quickly become the norm and the volume of checks falls rapidly. this does not mean that i see retail payments moving to some single electronic payment instrument that would substitute for the check in all or most of its uses. rather, i suspect we will see the evolution of several different systems, adapted to different kinds of payments that consumers and businesses make. some of these systems are in use already, some will be discussed today, others are not yet ready for prime time. some will be developed by the banking system, some by non - banks in cooperation, or even in competition, with depository institutions. so what will be the role of the federal reserve in all this? as you know, i chair a fed committee which is explicitly focussed on this question. we issued a report last january and are continuing to discuss how the fed can best contribute to the efficiency and safety of a retail payments system to which all depository institutions have access. the committee now consists of presidents mcdonough and minehan, governors kelley and ferguson and myself. you will hear from governor ferguson tomorrow afternoon. we see our role as working closely with the other participants in the payments process to help modernize the retail payments system and facilitate the transition over time to an efficient, convenient, and primarily electronic system. we spent quite a lot of time and energy last year discussing whether we should exit the business of processing check and ach payments. we decided to stay in and use our operational presence to help modernize both check and ach and to work actively with others to evolve a vision of a more efficient future payments system and help remove obstacles to its realization. in practice, what does that mean? first, it means increased efforts by the federal reserve banks - as providers of check and ach services - to develop new products that reduce costs and to price and market them effectively. in the first instance, that means focussing on ecp with truncation and imaging, in order to meet market demand and gain experience with different technologies. we hope to learn a great deal more about whether the wider use of these products can reduce the cost of check collection by substituting electronic technologies