differentiated risk - return profiles, allowing individual households significant opportunities to match their savings patterns with their anticipated requirements. in all probability, these opportunities are also subject to some threshold requirements, which means that households below a certain income and savings level cannot as yet access them. from the inclusion perspective, the challenge is clearly to lower this threshold in a way that does not compromise the commercial viability of the service provider. slide 11 presents a picture of the motivations that people say drive their savings behaviour. the question obviously allows people to acknowledge as many of the listed items as they want and the responses reported indicate the percentage of households who marked a particular motivation. although the data reported does not distinguish between households by income, the height of some of the bars clearly suggests that these motivations cut across income groups. let us focus on the four most frequently occurring responses. of these four, we have already spent a fair amount of time on ceremonies. the other three are, as might have been quite reasonably expected, are old age, children ’ s education and emergencies. once again, at the risk of repetition, i want to emphasize the point that, for all these requirements, the indian financial system currently offers a variety of products and services, but threshold requirements apply, which means that many lower income households whose motivations are the same as those of more affluent ones cannot access the same products and services. one could argue that there are no products and services which can meet these requirements with commercial viability. but this is a proposition that needs to be explored and, hopefully, proved wrong. the essential business - related point i would like to make with reference to savings decisions and motivations is that they must be seen in a dynamic context. in an economy that is growing rapidly, households are also equally rapidly evolving in terms of their consumption and savings choices and motivations. as many successful marketers have demonstrated, a life - cycle approach to the consumer is an extremely effective long - term strategy. a significant proportion of low - income households today will achieve middle income status in a few years. their choices then will partly be dictated by their experience with service providers during their transition. service providers who get customers in first, even at relatively low levels of activity, provided that they take a forward view of the relationship, can realistically look at bis central bankers ’ speeches benefitting from the increasing affluence and greater and more complex financial needs of those very customers. ( d ) borrowing motivations let me now turn to

woods architecture was not designed to cope with the instability and volatilities of the kind that i referred to earlier. having said this, it has to be recognized that, particularly after the asian crisis, there has been some progress in strengthening the structure of the old architecture. various high level forums such as g - 7, g - 33, g - 20 and international institutions such as imf, world bank and iosco have been busy in analyzing the past experience and in introducing ways and means of imparting greater transparency, early detection, better supervision, higher capital requirements, more sustainable exchange rate regimes, stronger standards and codes, and involving the private sector in resolving crises. some improvement has also been effected in imf financial facilities, such as contingency financing facility, to provide quick and higher access in the event of a crisis. however, it is also clear that these efforts, while having improved our understanding of the causes and consequences of financial volatility, and perhaps also helped in devising some precautionary measures, do not amount to a new international financial architecture which can cope with the new realities. i am also not sure that given the large volumes involved and short period over which a crisis can manifest itself, whether workable international solutions to the weaknesses in the present architecture are feasible within a reasonable time? my third point is that today - whether we like it or not - most of the responsibility for coping with the burden of instability and volatility is that of the country itself. from our own experience in india, i believe that there are three fundamental requirements for a country to prevent a financial crisis : • careful monitoring and management of exchange rates without, - i emphasis without - a fixed target or a pre - announced target or a band. flexibility in exchange rates is essential, but so as the ability to intervene, if and when necessary ; • a policy to build a high level of foreign exchange reserves which takes into account not only anticipated current account deficits but also “ liquidity at risk ” arising from unanticipated capital movements ; • a judicious policy for management of the capital account. short - term banking capital for financing investments and growth has to be avoided, while foreign direct investment and portfolio investment have to be encouraged. the point is simply that in respect of foreign direct investment and portfolio investment, there is a “ cost ” involved for the foreign investor in quickly reversing such flows. this cost is not present in respect of fixed