3) Why does banks maintain Reserves with RBI?
4) What is CRR and SLR meant for?
5) Explain LOLR Function of RBI?
6) What are Basel II Norms?
7) How do Basel II are different from Basel I?
8) What is straight Jacket approach in Basel I?
9) One size fits all theory in Basel Norms?
10) Is there any minimum capital requirement to be maintained by banks, if so then who decides the same?
11) What are KYC norms?
12) They come under which act?
13) How do suspicious transactions are reported and to whom?
14) What is function of banks?
15) It is defined under which act and which section?
16) Out of Corporation Bank, Allahabad Bank and IDBI which one is best and why?
17) Parameters for assessment of bank's financials(NII,NIM and ROA)

MISSION RBI 2011

Q1. "With great liberalisation, the need for regulation is also higher" explain.

Q2. What is derivative contact? Explain "forward", "future", "option" contract.

Q3. Explain the concept of a “stock market index”. What does this index indicate?

Q4. Discuss the principal features of Eurocurrency Loans.

Q5. Write short notes on:-

a. Capital Adequacy Norms

b. Credit Rating

c. Debt Securitization

d. Infrastructure finance

section II

Q6. Explain”organisation structure”. What are the steps involved in the designing the organisation structure?

Q7. What is directing? Explain the principles and techniques involved in directing.

Q8. “Leaders are born; not made”. Comment.

Q9. Explain the steps involved in the implementation of change in an organisation. What are the factors that create resistance to change?

Economic & Social Issues – Old Paper

1 a) Explain the factors responsible for the fall in the incidence of poverty in India.

b) India’s concern with poverty alleviation has mostly remained at the rhetorical level. Explain.

2 a) What is the relationship between development & environment?

b) What are the measures undertaken by the government to prevent environment damage?

3 a) India’s organized manufacturing sector has jobless growth which is a matter of serious concern. Do you agree? Discuss.

b) Suggest suitable policy for employment generation in India.

4 a) Discuss the problems faced by the public sector in India.

b) Explain the policy measures adopted by the government in the area of disinvestment.

5 a) Examine the role of caste in Indian society & polity.

b) What is the impact of casteism on Indian political system?

6 a) Explain the terms current account, capital account in India’s balance of payments & bring out their significance.

b) Discuss the policies adopted by the government to attract foreign direct investment in India.

7 a) Discuss the important issues of concern to developing countries like India, arising out of WTO agreement.

b) Critically examine how trade blocs create obstacles to free international trade.

8 a) Examine the nature of fiscal crisis which has emerged in India in recent times.

b) ‘In the background of economic crisis, there is a need to consider the policies to promote banking system’. Do you agree? Substantiate your view point.

9 a) ‘Human development level in India is low because of inadequate spending on education & health’. Comment.

b) State measures adopted by the Government to promote human development in India.

10 Short Notes ( Any two)

a) Globalisation & changing status of women.

b) SEZ : Boom or Bane.

c) Coalition government & governance in India.

d) Role of MNC’s.

English – Old Paper

1. Write an argumentive essay of about 500 words, on any one of the following : ( 40 mks)

a. Is China a threat to India

b. The 2008 recession was a myth in India.

c. Can we leave the world a safer place for the next generation?

d. Formal education is the only way to success in life.

e. Business Schools – more business than school?

2 a. Precis (24 mks)

b. Any two questions ( 10 mks)

c. Contextual meaning & implication of any three (6 mks)

3. Attempt any one. ( 20 mks)

a. A car manufacturer has appointed a committee to investigate the feasibility of setting up a car manufacturing plant in India. As the Chairperson of the committee, draft your report with recommendations.

b. As the MLA from a rural area, draft a proposal to start a Technical College in your area.

c. As the General Manager of a company of a company, draft a circular to all employees about measures to be adopted, in order to tide over the recession.

English - old paper 2

1. Write an argumentative essay of about 500 words on any one of the following:- (40 marks)

(a) What went wrong in Singur

(b) The Role of Media in a Crisis

(c) The Future of Peace in India

(d) Can we host the Olympics?

(e) The Nuclear Deal

2. (a) Make a precis of the following passage in your own words, reducing it to about 250 words and give it a suitable title. Use the special sheet provided for the purpose:-(24 marks)

(A long essay on credit crisis)

(b) Answer the following questions based on the passage, briefly and in your own words:

(Eight questions based on the passage were asked carrying two marks each)

b) (ii). Explain the contextual meaning of the following expressions (any three)

(six simple expressions were given from the passage.)

3. Attempt any one of the following in about 250 words:-(20 marks)

(a) On behalf of the employees of your bank, draft a representation to the management asking for improvement in infrastructure for better work performance.

(b) Draft a proposal to disburse funds and relief material to the flood hit victims of Bihar.

(c) Imagine yourself to be the Governor of the Reserve Bank. What measures would you adopt in the present financial crisis?

Answer any five questions

1. (a) Why, do you think, has inflation become a major problem in India? (10)

(b) Suggest suitable measures to control this inflation. (10)

2. Examine the impact of India's economic reforms on unemployment and poverty. (20)

3. Discuss India's present economic policy on the following subjects:-

(a) Role of MNCs. (10)

(b) Capital Account Convertibility (10)

4. Discuss the major changes in the foreign exchange rate policy in India since 1991. (20)

5. (a) What are the problems of Scheduled Castes in India? (10)

(b) Discuss the impact of the reservation policy on Scheduled Castes and Tribes in India. (10)

6. (a) Analyse the harmful effects of rapid urbanisation in India. (10)

(b) How can they be removed (10)

7. Discuss the suitability of the following for India:-

(a) Presidential form of Government (10)

(b) Parliamentary form of Government (10)

8. "Human resource development has not received the significance it deserves in India." Do you agree with this view? Discuss. (20)

9. (a) What are the weaknesses of India's Higher Education System? (10)

(b) What changes, do you think, are needed in this system? (10)

10. Write short notes (any two):-

(a) Impact of economic development on environment. (10)

(b) Unorganised sector in India (10)

(c) Significance of WTO in India (10)

(d) Privatisation in India. (10)

Section I

1. "The focus of banks in India has now shifted from statutory compliance to internal financial management." Comment.(20)

2. Discuss the salient features of the foreign exchange market in India.(20)

3. Briefly discuss the main features of the RBI directives relating to acceptance of deposite by NBFCs. (20)

4. What is "book building" ? Explain briefly the framework of the book building method of issue of capital.(20)

5. Write short notes on any two of the following:-

(a) WTO and India(10)

(b) Venture Capital Fund(10)

(c) Role of NABARD in economic development. (10)

(d)Non-performing Assets

Section II

6. "Deregulation of authority is not loss of power; it is enhancement of power." Examine this statement critically. (20)

7. What is performance appraisal? What are its objectives?(20)

8. (a) What are the essentials of a good control system?(10)

(b) What are the behavioural implications of control?(10)

9. Describe the salient features of corporate governance in India. (20)

As you may know, the financial inclusion agenda has assumed top priority in the Reserve Bank of India’s current scheme of things and the Bank is actively engaging with the financial sector to ensure that the objective of establishing a banking presence in all villages with a population of over 2000 people is achieved. More importantly, it needs to be achieved in a commercially viable way; banks and other service providers must not see it as a mandate whose burden they have to bear in terms of higher costs and lower earnings. As Governor Dr. Subbarao has put it, financial service providers must see inclusion as an opportunity, not an obligation.

When I accepted the invitation to deliver this lecture and began thinking about an appropriate topic, the issue of commercially viable financial inclusion came quickly to mind. In effect, this is exactly what would characterize Mr. Narayanan’s career with the City Union Bank and his contribution to not just the institution that he was associated with but to the broader socio-economic environment in which it functioned. Of course, while I have had the opportunity to work in a commercial organization, I have never worked for a commercial bank. It would, therefore, be presumptuous of me to approach the topic from the perspective of a business strategy for banks. However, as we all know, strategies are not designed in a vacuum. A sound understanding of the market environment is a critical input. Who the potential consumers are, what motivates and drives their decisions, what constraints and risks they face and so on are all fundamental questions, the answers to which are the starting points of strategy formulation. In other words, the better the understanding banks and other financial service providers have about the potential consumers of their inclusion-oriented products and services, the more likely their strategies are to succeed in a way that benefits both consumers and producers.

This is the issue that I would like to address in this lecture. I will attempt to characterize the potential consumer for financial inclusion products and services, using survey data reported by a number of survey institutions that have been observing the Indian consumer for some time now. Based on these characterizations, I will articulate some key messages emerging for commercially viable financial inclusion.

II. The current status of inclusion: an overview

Before I begin looking at consumer characteristics, let me provide a quick overview of the current status of access of consumers to financial services. Admittedly, this is not a complete picture, as it does not cover the role and activities of institutions other than banks. I merely want to emphasize the gap that currently exists, which in turn represents the opportunity that the financial sector has to design and deliver appropriate products and services to a very large number of potential customers.

Slide 1 provides a set of summary statistics relating to the penetration of various categories of financial products. First, the relatively low penetration of bank branches must be highlighted - only 30,000 out of 6,00,000 habitations have a banking presence. As is well understood, the goal of having a physical banking facility in every habitation is unrealistic, which is why the inclusion strategy is largely based on the use of Information and communication technology (ICT) to expand banking access virtually through the mechanism of a Business Correspondent (BC), who carries a handheld device networked to the bank's systems. This is an enormous technological discontinuity enabled by the spread and efficiency of the mobile telephone network and, clearly, the inclusion strategy must take full advantage of this resource. Even then, we must recognize that there are constraints to the rollout of the BC model, which also needs a certain minimum scale of operation to make it viable. Therefore, the strategy envisages a phased expansion, with larger habitations being targeted first to ensure the viability of as many BCs as possible. In this sense, the phased approach, which first focuses on habitations with populations above 2,000 is based on the acceptance of commercial viability as a key driver of the success of an inclusion strategy.

The other statistics on Slide 1 provide some indication of the size of the opportunity. Just because penetration in certain products and services is low does not mean that they represent a natural and automatic opportunity; penetration could be low because there is no demand. It is ultimately a matching of consumer characteristics and the potential demand that is implied by them that allows the service provider to assess the opportunity. However, the statistics presented on the slide do suggest that, apart from savings accounts, which have about 40 per cent penetration, there are several other financial products that might meet existing consumer requirements, such as insurance, which have very low penetration. Similarly, debit cards, which facilitate the use of technology, thereby reducing the dependence of bank customers on physical branches, may help to significantly expand the capacity of the banking network without necessarily setting up more branches.

Apart from the aggregate picture, it is also useful to look at the status from the perspective of inequality. Slide 2 and Slide 3present some data that reveal the differential access that people at different income levels have to the financial system. FromSlide 2, it appears that households with an income below Rs. 50,000 (in 2007) find it relatively difficult, or unattractive, to open a bank account. The survey does not reveal whether the relatively low penetration of bank accounts in this income segment is because they can't open them or they don't want them. This is an important distinction, because it implies different actions by banks to improve penetration amongst these households. If access is a problem, then simplified procedures and lower thresholds may be sufficient to achieve the objective and, indeed, this is exactly what is being done by means of no-frills accounts. However, if it is because people don't find adequate value in opening accounts, the challenge of inclusion becomes a little more complicated. Clearly, the mere opening of more and more accounts is not going to achieve the inclusion objective if these accounts are not used as the platform to access a range of financial services that meet the various requirements that the household is trying to satisfy. This raises the issue of product and service design as a critical component of a viable inclusion strategy, which I shall repeatedly come back to during the course of the lecture.

Slide 3 looks at the situation with regard to access to loans differentiated by income levels. Here again, the relatively low access of the lowest income group is striking. It is not as though these households do not need credit; if the banks do not meet their requirements, they are clearly accessing other sources. The same question arises here. Are people in this income segment not getting bank credit because they can't or because they don't want to? As in the case of accounts, the answer to this question is critical to devising an effective inclusion strategy. It may underscore the need to look for product design solutions to the problem of low penetration.

III. An exploration of consumer characteristics

(a) Employment and Earnings Differentials

Let me now move on to the core of this lecture, i.e., to characterize the potential consumer for products and services emerging from a financial inclusion strategy. Let me begin with the nature of employment in the country, which, to my mind, is a critical attribute to the kinds of financial services which people may want. Slide 4 provides the composition of the domestic workforce in terms of their sources of income. It is most striking that over half the workforce is categorized as being self-employed. Of course, this should not come as a surprise, as the majority of services we consume on a day-to-day basis are provided by people who logically fall into this category. Another significant proportion falls into the category of casual labour. Only a relatively small minority is placed in the category of regular wage or salary earners, of which a relatively large proportion is undoubtedly associated with the public sector.

What does this mean in terms of potential demand for financial services? For the self-employed, it clearly means, among other things, the need for a reliable and low-cost source of working capital, which allows them to optimize on their inventories, if they are occupied in trading activities or acquire productivity-enhancing and service-enhancing assets, which have relatively short payback periods. We all have seen how, first, pagers and, then, cheap mobile telephony completely changed the economics of self-employed service providers. This, of course, happened at an aggregate level, but as we look deeper into the business models of different self-employment categories, I am sure we will discover sector-specific opportunities to make similar productivity improvements. Discovering such opportunities and converting them into a viable lending model is something that the financial sector may benefit from, both in terms of furthering the inclusion agenda and expanding their revenue and profitability bases.

The data presented in Slide 5 and Slide 6 provide a somewhat different perspective on the potential consumer base. In Slide 5, we see the relative incomes of workers in different kinds of occupations. This differentiation is important because it reflects a number of underlying relationships between educational status, employment opportunities and earning potential. The ultimate goal of development policy, of which financial inclusion is a critical component, is to raise the incomes of as many households as possible in a sustainable way. There is, of course, no iron law which says that incomes earned by all occupations must be equal. Differentials that emerge from qualifications, skills, productivity and value added are all legitimate in a market economy, in which financial incentives drive resource allocations across alternative activities. However, from the policy perspective, we must also be conscious of barriers and bottlenecks, which impede the productivity and, consequently, the earning potential from different activities.

As Slide 5 indicates, in rural areas, people with some professional qualifications and those in regular jobs, such as in the administrative sector, earn more than people who are lower down on the skills ladder and those who are self employed. One response to this could be to employ as many people as possible in the former areas. In a sense, this was attempted a few decades ago. It generated benefits, but also imposed costs; in any case, as a strategy, it is inconsistent with the current emphasis on fiscal discipline and the efficient deployment of resources across the economy. The focus must, therefore, be on finding ways in which the earning potential of the other occupational categories can be raised. Access to appropriate financial products and services is surely one of these, even possibly the most important one. Of course, it may not be the only requirement - the silver bullet, so to speak - and it is important for the success of an inclusion strategy to identify the other, complementary requirements.

One observation that I can make from my recent exposure to and interaction with rural Self-Help Groups and other livelihood mechanisms is that they face significant challenges in finding and accessing the right kinds of markets for their products, which results in relatively low realizations for their products, thus constraining their earnings potential. To my mind, the general validity of this proposition and its implications for building appropriate complementary inputs into the financial inclusion strategy need to be explored further.

Slide 6 presents the same data for urban workers. The pattern is essentially similar to the rural one and much the same set of conclusions can be drawn about the distinction between legitimate sources of earnings differentials on the one hand and those caused by barriers and bottlenecks on the other. The reason I brought the urban picture separately into the presentation is to emphasize the fact that the financial landscape in urban areas is completely different from that in the rural areas. If, indeed, lack of access to financial services is a significant reason for the persistence of earnings differentials in urban areas, then it suggests that a relatively well-penetrated environment is also not delivering inclusion to its potential. If this is the case, then we must be cautious in linking the mere presence of financial service providers with the achievement of financial inclusion. The strategy must go beyond organizational presence to the design of appropriate products and services, a point that has been made earlier in the lecture but can be re-emphasized.

(b) Expenditure Patterns

Let me now turn to an analysis of how consumers, many of whom can be considered the target segment for financial inclusion, spend their money. Slide 7 presents a picture of households' routine expenditures, the largest segment of which is, understandably, food. The proportion of income spent on food clearly goes down as income goes up, but at the aggregate level, the proportion is significant. But, this is not an issue I want to dwell on here. Let me move on to Slide 8, which displays what have been described as "unusual" expenditures by households, which essentially means that these expenditures are generally incurred, but not on a regular or predictable basis. The pattern suggests that the most significant unusual expenditure by far is on ceremonies. This is followed by medical expenses. The two categories together account for almost 80 per cent of unusual expenditures across all households. Slide 9 is even more revealing. It suggests that, among lower income households, the proportion of unusual expenditures spent on these two activities is even more significant.

We have all heard of people whose household budgets are severely stretched, even broken, by expenditure on ceremonies and healthcare. We can perhaps be somewhat dismissive about the first, arguing that this is purely discretionary and the household can work within its resource limitations. But then, who are we to judge the household's perceptions of its social obligations? On the issue of medical expenditures, there is no room at all for such discretion; it usually is a matter of life or death.

Given the significance of these two categories of expenditure, particularly amongst lower income households but also in others, can we think of financial products that allow households to meet these expenditures without bearing a crushing burden? The health issue clearly lends itself to a low-cost insurance solution and there has been some progress on widening access to health insurance. But, this needs to be matched with an increase in the supply of health care facilities, not to mention the promotion of low-cost treatments, which can be accommodated by a mass insurance programme. This is another example of the need to visualize complementary inputs, which amplify the benefits of financial inclusion.

The need to develop a financial buffer for expenditures related to ceremonies, though more complicated than health insurance, also appears to lend itself to product design. As a lifelong employee of the organized sector, I have had the benefit of being a member of one provident fund scheme or the other. One important feature of all the schemes I have been part of is that they allow me to withdraw a substantial portion of my accumulated funds for expenditures connected with my daughter's marriage (though, not my son's, as I recall). This is, in essence, a systematic investment plan for, among other things, ceremonial expenditures. Products of this nature are already available in the market; the question is, essentially, one of threshold contributions and whether they can be lowered to provide access to large numbers of households, even while giving them a reasonable rate of return so there is sufficient accumulation.

(c) Savings and Investment: Choices and Motivations

Let us now take a look at the way in which households deploy their resources and what motivates their savings decisions. This should provide a basis for both addressing specific needs, essentially an extension of the discussion in the previous section, and also getting a sense of the limitations on the options households have to deploy their savings.

Slide 10 presents a very striking picture. Across all households, the primary channels for deploying financial savings are bank deposits and "kept at home", which presumably includes cash, gold and jewellery. The latter is not surprising, given the earlier data point on the penetration of savings accounts. What may be surprising, though, is the significance of the proportion kept at home; more so, the finding that urban households actually hold a higher proportion of their savings in this form. Of course, this may reflect a greater ability to afford gold and jewellery, but the pattern raises a fundamental question. Why do these households prefer to keep their savings in a form that does not optimize on the risk-return trade-off?

Putting all (or most) of your eggs in one basket, which is essentially the message from Slide 10, may be an appropriate strategy under some conditions; the complete absence of investment options, for example. But, clearly, at the aggregate level, options are not absent; the Indian financial system offers an increasing variety of alternatives with finely 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 benefitting from the increasing affluence and greater and more complex financial needs of those very customers.

(d) Borrowing Motivations

Let me now turn to the last of the consumer characteristics that I have on my list. Slide 12 presents data on the reasons why people borrow money. Considering all loans taken by the households surveyed, over 50 per cent of rural households and about 45 per cent of urban households report that they borrowed money to deal with financial and medical emergencies. Business purposes were also significant, but not dominant. Of course, since lending money to enable people to deal with such situations is not the conventional activity of banking or most other formal financial service providers, it is unlikely that this requirement would be met by this category of lenders. The data in Slide 12 validate this conjecture; significantly, the proportion of households who borrowed for these purposes from institutional sources was far less than those who borrowed from non-institutional sources. In fact, what may come as a surprise is how many households actually borrowed from institutional sources for the purpose of dealing with emergencies! This suggests to me that the capacity to meet these requirements exists. Again, it comes back to the question of whether the right kinds of products exist to expand the coverage to households that are currently excluded from access to credit.

IV. Key Messages

I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into a devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I will briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.

The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, has low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.

The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earnings patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed or in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.

The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.

The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-cost, mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive the attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.

The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism - needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario , a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.

V. Conclusion

The basic premise of this lecture was that we need to take fully into account various behavioural and motivational attributes of potential consumers for a financial inclusion strategy to succeed. In this sense, it is no different from any business strategy development exercise. Where it does differ though, is in terms of significance. There is clearly an enormous gap when it comes to access to and delivery of financial services. Closing this gap will contribute to enhanced livelihoods through higher productivity, and an improved ability to deal with occasional, lumpy expenditures as well as cushioning the impact of financial emergencies. This is not a matter of a few hundred or a few thousand consumers, but an issue of hundreds of millions. The social costs and consequences of badly conceived and executed inclusion strategy could be enormous. We need to bring all relevant knowledge and experience into the development of the strategy in order to maximize the possibility of it succeeding. Understanding what the potential consumer needs and why he needs it is one such knowledge input; indeed, I have tried to argue, a critically important one.

I would like to end by thanking Sastra University for inviting me to deliver this prestigious lecture, to the management of the City Union Bank for their very generous hospitality during our visit to Thanjavur and Kumbakonam and to all of you for coming here to listen to the lecture.

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* VI V. Narayanan Memorial Lecture by Dr. Subir Gokarn, Deputy Governor, Reserve Bank of India at Sastra University, Kumbakonam on March 21, 2010. Inputs from Pallavi Chavan, Bhupal Singh and Muneesh Kapur are gratefully acknowledged.

1. Seeking big participation of Indian business houses to boost the economic cooperation and help in resurgence of Africa, Mozambique Prime Minister Aires Bonifacio Baptista Ali on Monday extended an open arm warm invitation to Indian companies to grab the opportunity and make ‘big investments' in Africa.
2. “Indian multinational companies, small and medium enterprises and individuals are already investing in Africa and the results are very encouraging.
3. Indeed, we would like to reiterate our warm invitation to all Indian business people to make huge investments in Africa and join our efforts geared to boost and diversify our economies, thus contributing to African development,” Mr. Baptista Ali said at the 7th CII-EXIM Bank conclave on India-Africa Project Partnership.
4. Mozambique is the partner country at the summit which is a follow-through for the India-Africa summit to be held in May in Ethopia and is likely to be attended by Prime Minister Manmohan Singh.
5. Togo, which has been accorded as the guest country status, is represented by its Prime Minister Gilbert Houngbo.
6. The Mozambican Prime Minister said the conclave was taking place at a moment characterised by growing instability and upheavals in the Middle East and increasing signs of economic and financial instability worldwide due to increase in oil and food prices.
7. “This represents a challenge and an opportunity for our countries. We need to devise innovative approaches to promote peace, stability, democracy and well-being to our citizens and nations,” he said.
8. Mr. Baptista Ali said India could tap opportunities arising from regional trade agreements in Africa, as well as preferential trade agreements signed with large Western economies.
9. He said both Africa and India were important players in the global economy.
10. While Africa was a resurgent economy with large strategic resources, India had the advantage of a vast market and an acknowledged record in innovative technologies.
11. “Africa is strongly committed to promote private sector initiatives and South-South cooperation as key engines of economic growth in order to eradicate poverty and promote development in our countries, India is a key partner in this process,” he said.
12. T.C.A. Ranganathan, Chairman and Managing Director of Exim Bank of India, said “Ever since this conclave started seven years ago, India-Africa trade has gone up seven-fold.”
13. He pointed out that six of the world's fastest growing countries were from Africa.
14. Confederation of Indian Industry (CII) President Hari Bhartia said both the regions needed to learn from each other.
15. “Technology and information sharing will play an increasing role in empowering people,” he said.

1. Software giant Microsoft on Monday said it had appointed Bhaskar Pramanik as Chairman for its India operations.
2. The appointment, effective Monday, comes less than two months after Ravi Venkatesan quit as Microsoft India's Chairman and Corporate Vice-President.
3. Prior to the current role, Mr. Pramanik served as Managing Director for Oracle India and Sun Microsystems.
4. “As Chairman, Mr. Pramanik will oversee Microsoft's sales, marketing and services subsidiary, provide overall leadership on all Microsoft assets in India and lead our citizenship agenda in close alignment with India's national priorities,” Microsoft said in a statement.
5. He will report to Jean-Philippe Courtois, who is the President of Microsoft International.

1. India and Africa, seeking to further strengthen the economic engagement, have set a target of $70 billion by 2015.
2. India also reaffirmed its commitment to provide cheap medicines for the poor despite strong legal and diplomatic offensive launched by Western pharmaceutical companies.
3. “We have set for ourselves a target of $70 billion by 2015 and I am sure that we will be able to achieve it. At present, the trade stands at $45 billion,'' Commerce and Industry Minister Anand Sharma said while inaugurating the seventh conclave on India-Africa Project Partnership, ‘Creating possibilities: delivering value', organised jointly by the Confederation of Indian Industry and the Exim Bank with the support of ministries of commerce and industry and external affairs.
4. Mr. Sharma reiterated India's commitment to ensure supply of affordable life-saving drugs for poor people. “India will not allow a situation where life-saving medicines are out of the reach of poor people.
5. We will ensure that whatever new molecules develop, the benefit must reach the poor people,'' he said.
6. He pointed out that Indian generic has played a pivotal role in bringing down the cost of treatment of diseases like HIV-AIDS from above $11,000 to less than $400.
7. “This has not happened without threat. Legal and diplomatic battles have to be fought and won due to stranglehold of multinational cartel which was denying the availability of these drugs to people in poor countries.
8. India has one of the finest IPR regimes, at the same time, intellect of the world must be for the benefit of humankind,'' he said.
9. The Commerce Minister highlighted food and energy security threat in the backdrop of fragile global recovery from the financial crisis and unrest in Africa and West Asia.
10. The Exim Bank has entered into an agreement on a project basis with Tanzania and Mozambique to provide lines of credit worth $36 million and $20 million, respectively.

With major global energy giants choosing to stay away from the Ninth Round of New Exploration Licensing Policy (NELP), the Central Government on Monday received 74 bids for 33 oil and gas exploration blocks out of 34 blocks on offer with state-run Oil and Natural Gas Corporation (ONGC) bidding for maximum number of blocks.

ONGC, which had won almost two-thirds of the blocks offered in NELP VIII, bid for as many as 29 areas in the latest round.

Another public sector company, Oil India Ltd (OIL) bid for two areas.

State-run GAIL (India) and upstream subsidiary of state-owned Bharat Petroleum Corporation Limited (BPCL) bid for four blocks.

Reliance Industries Limited (RIL) bid for six blocks — two deep sea areas in the Andaman Basin in the Bay of Bengal and four onshore blocks in Rajasthan and Gujarat.

Cairn India Limited (CIL) submitted offers for only two blocks — one onland and one offshore. Interestingly, it has not bid for any two exploration blocks on offer in Rajasthan.

The only other notable bidder was U.K.'s BG Group, which teamed up with BHP Billiton to bid for a deep-water block in the Mumbai basin, off the West Coast. Essar Oil bid for one onland block in the Cambay Basin.

“The response to the latest round of NELP has been more than satisfactory.

It has been encouraging,” Petroleum and Natural Gas Minister S. Jaipal Reddy told reporters after the close of bidding for the 34 blocks offered in NELP-IX here.

Rejecting arguments that regulatory troubles on the Cairn-Vedanta Resources deal sent negative signals to investors,

Mr. Reddy said “We have not taken a negative view or a positive view. We have maintained absolute neutrality. The foreign investors did not stay away due to any government policy.”

“We have put in place a very transparent policy. Full justice is being done to foreign companies.

It is not for want of inviting atmosphere in India that they did not bid.

The blocks would be awarded and production sharing contracts (PSC) will be signed in four months,” he added.

ONGC and OIL teamed up to bid for 15 blocks together, while North East-focussed OIL bid for two blocks on its own as operator.

Of the 33 blocks that got bids, 14 areas received single bid.

ONGC and its partners are the sole bidders in 10 blocks.

OIL and its partners are sole bidders for one Mumbai offshore shallow water block.

India had got an investment commitment of $1.1 billion in NELP-VIII.

The most sought-after block was a Cambay Basin onland block in Gujarat, which got six bids, including from RIL, Essar Oil, ONGC-OIL-HPCL and a GAIL-Bharat PetroResources-EIL-Bharat Forge consortium.

Out of the 34 blocks, 19 blocks are totally new areas — seven in deep sea, two in shallow water and 10 onland blocks.

The remaining 15 (one in deep water, 5 in shallow water and 9 onland blocks) are recycled blocks.

ABOUT TRANSPARENCY INDEX

India has slipped to 87th spot in Transparency International's latest ranking of nations based on the level of corruption, with the global watchdog asserting that perceptions about corruption in the country increased in the wake of the scam-tainted Commonwealth Games.
Transparency International's 'Corruption Perception Index' report covering the public sector in 178 countries shows that India fell by three positions from its ranking of 84th in 2009.
With an integrity score of 3.3, India is now ranked 87th in the world in terms of corruption.
Neighbouring China is ahead of India in the list at 78th place, with a score of 3.5.
It was at 79th position in 2009.
"India has gone down in the ranking as well as integrity score and this is a matter of concern and regret.
It appears that the level of governance has not improved despite India having a skilled set of administrators," Transparency International India Chairman P S Bawa said here.
The rankings, on a scale of 0 to 10, are based on the extent of corruption and each government's ability to punish and contain corrupt activities, among other criteria.
A score of zero is perceived to be highly corrupt while 10 would indicate the lowest level of corruption.
According to the report: "The perception about corruption in India seems to have increased primarily due to alleged corrupt practices in the recently held Commonwealth Games (CWG) in Delhi."
As many as four investigating agencies -- the Central Vigilance Commission (CVC), Enforcement Directorate (ED), Income Tax Department and Comptroller and Auditor General (CAG) -- are looking into allegations of corruption against the organisers of the CWG, which concluded here earlier this month.
The top three countries with the lowest level of corruption globally, as ranked by Transparency International, are Denmark, New Zealand and Singapore.
Denmark was ranked first in the report, with an integrity score of 9.3, while New Zealand and Singapore came second and third with a similar score.
Bhutan was the best performer in the South Asian region and was ranked 37th, with an integrity score of 5.7.
However, other SAARC nations are ranked below India.
Pakistan is ranked at 143th in the list, with an integrity score of 2.3, while Bangladesh is at 134th, with a score of 2.4. Sri Lanka was ranked 91st in the list, with an integrity score of 3.2, while Nepal was 146th (2.3) and Maldives joined Pakistan at 143th place (2.3).
The world's largest economy, the USA, garnered an integrity score of 7.1 and was 22nd in the list.
Among BRIC countries, Brazil was at 69th position with a score of 3.7 and Russia was 154th, with an integrity score of 2.1.
Transparency International is organising Anti-Corruption Day on December 9 to sensitise the public on this issue.
The report is based on 13 surveys conducted throughout the year by various international bodies, including the World Bank, the European Union, the International Monetary Fund and the Freedom House Foundation.

1. The announcement by the North Atlantic Treaty Organisation (NATO) that it is to enforce the United Nations no-fly zone over Libya confirms the extent of confusion over western policy on Libya.
2. The alliance's Secretary-General, Anders Fogh Rasmussen, says it will command only the no-fly zone, and admits that there will be two operations, one run by NATO and the other, comprising the arms embargo and air strikes — which Turkey says go beyond the United Nations resolution on intervention — by a “coalition.”
3. There may be yet more squabbling to come, not least because the decision on the transfer of command was preceded by a week of angry disputes among NATO's 28 members.
4. Turkey, in particular, objects strongly to what it sees as French plans to control the scope and nature of the current U.N.-backed action.
5. It has also accused President Nicolas Sarkozy of using the confrontation with Tripoli as a launching pad for his own re-election campaign.
6. Such issues, however, only form a subset of wider problems.
7. One of those is domestic public support.
8. In the United Kingdom, backing — usually high at the start of such military adventurism — is 45 per cent, with 35 per cent against; that is even worse than the 53-39 per cent reported when the illegal 2003 Iraq invasion began.
9. In the United States, 74 per cent favour multilateral action to protect Libyans against their current dictatorship; but 79 per cent express concern over the continuing violence in Libya.
10. In North Africa and West Asia, public feeling against the intervention is hardening rapidly, not least because of French Interior Minister Claude Guéant's foolish comment that his country was leading a “crusade” to stop President Muammar Qadhafi killing fellow-Libyans.
11. Secondly, President Obama, whose administration refuses to call the Libya mission a war, is under pressure to explain the policy and to specify an exit strategy.
12. His attempt to transfer command to NATO and his European allies will achieve neither; the U.S. will remain the major participant, but involving NATO will reduce the accountability of the warmongers to their electorates.
13. The absence of clear aims, furthermore, heightens the risk of an open-ended conflict, into which the foreign participants will almost certainly be drawn more and more deeply — with the additional risk that the main aim becomes regime change and not civilian protection.
14. In view of the vagueness of the U.N. Security Council resolution on the no-fly zone, it is regrettable that Russia and China abstained instead of vetoing the resolution that has enabled this military aggression and expanding war in an already tormented region.

1. Minister for Environment and Forests Jairam Ramesh must be commended for his frank comments on the state of the Environment Impact Assessment (EIA) process.
2. Many well-regarded scientists have been making the point that the EIA, a mechanism instituted by the Ministry of Environment and Forests in the early phase of India's economic liberalisation and amended in later years, has been turned into a joke because it is left to the project proponent to arrange for the EIA report.
3. This dyfunctional system has produced only a thriving industry of consultants.
4. Many of them without the requisite qualifications; some are nothing more than paid pipers.
5. It is no surprise that several reports submitted by these consultants have been exposed as plain cut-and-paste reproductions of other publications.
6. Among the prominent examples of ill-advised shortcuts leading to flawed conclusions is the Kudremukh iron ore mining project in Karnataka, which was eventually ordered closed.
7. In that case, only rigorous assessment by the Indian Institute of Science and other agencies produced evidence of harm to fragile ecology; comprehensive study by the Centre for Wildlife Studies documented environmental damage on account of the sediment load in the Bhadra river.
8. Evidently, the earlier EIA reports based on rapid assessments provided little insight. This experience is not unique and there is a strong case to introduce stringent checks now. Reform should begin with the choice of agency to conduct the impact assessment, and include the setting of wide terms of reference.
9. The task of reforming the EIA process is a challenging one for Mr. Ramesh, who has initiated welcome steps to introduce transparency in his Ministry.
10. State-level authorities must also be made partners in the effort because some categories of environmental clearances come within their ambit.
11. Independent studies of the working of expert appraisal committees formed under the EIA Notification of 2006 show that the rejection rate for projects in sensitive sectors such as construction, industry, thermal power plants, and mining is suspiciously low.
12. The Union Ministry's discovery that some consultants submitted wrong reports, resulting in penal action, is proof positive of systemic rot.
13. The cure lies in genuine, science-based EIA. All this is not to say that fresh barriers must be erected to development.
14. What needs to be emphasised is the importance of assessing externalities associated with individual projects and consider them in perspective.
15. The loss of ecology has irreversible, inter-generational consequences.
16. The protection of air, water, soil health, and biodiversity should be primary environmental imperatives.

TOP 20 QUESTIONS TO BE KEPT IN MIND

1. 42ND CONSTITUTIONAL AMENDMENT IS KNOWN AS MINI CONSTITUTION.
2. ARTICLE 19 IS RELATED TO RIGHT TO SPEAK.
3. SUSTAINABLE DEVELOPMENT MEANS CONTINOUS ENVIRONMENTAL AND ECONOMIC DEVELOPMENT.
4. SILENT VALLEY IS SITUATED IN NILIGIRI MOUNTAIN OF KERALA.
5. RANAJI TROPHY IS RELATED WITH CRICKET.
6. RAJASTHAN IS THE CURRENT RANAJI CHAMPION.
7. TIM BENNERS LEE IS THE INVENTOR OF WWW.
8. HOSNI MUBARAK, EX PRESIDENT OF EGYPT, HAS RESIGNED FROM HIS POST.
9. "THE FRINKLER'S QUESTION" IS THE BOOK WRITTEN BY HOWARD JACOBSON.
10. MAN MOHAN SINGH IS THE PRESIDENT OF PLANNING COMMISSION. IN FACT, PM IS THE EX-OFFICIO CHAIRMAN OF PC.
11. INDIAN IS JOINT WINNER OF SULTAN AZLAN SHAH CUP HOCKEY TOURNAMENT WITH SOUTH KOREA.
12. START TREATY IS REALTED WITH REDUCING NUCLEAR WEAPONS. IT HAS BEEN DONE BETWEEN RUSSIA AND USA.
13. BHARAT NIRMAN PROJECT WAS STARTED IN YEAR 2005 TO BOOST SIX SECTORS.
14. GREAT BARRIER REEF IS IN AUSTRALIA.
15. PT BHIMSEN JOSHI IS THE 2008 BHARAT RATNA PRIZE WINNER.
16. PIIGS=PORTUGAL-ITALY-IRELAND-GREECE-SPAIN
17. RECENTLY ESTONIA HAS ADOPTED ITS CURRENCY AS EURO.
18. SHIVARAJ PATIL COMMITTEE WAS FORMULATED TO LOOK AFTER THE MATTER OF 2-G SPECTRUM SCAM.
19. ARTICLE 32 IS THE HEART AND SOUL OF THE CONSTITUTION.
20. CAG IS THE CUSTODIAN OF PUBLIC FUND IN INDIA.

TO KNOW THE LEVEL OF HAPPINESS IN INDIA

India has slipped 10 places to the 88th spot, way below neighbouring China, in the World Prosperity Index due to poor healthcare and education systems coupled with weak entrepreneurial infrastructure.

While last year, India stood at 78th position, according to London-based Legatum Institute that compiled the index.

China is ranked 58th in the list of 110 countries, which is topped by Norway.

Other countries in the top five are Denmark (2), Finland (3), Australia (4) and NewZeland (5).

The prosperity index is based on 89 variables over 110 countries, grouped into eight sub-indices, and claims to comprehensively rank the level of prosperity in 110 nations of the world.

It is done by taking into account both economic growth and citizens' quality of life, drawing on data from various sources, including the Gallup World Poll 2009 and UN development Report.

The country ranked low on education ground (89th in the Index), health (95th), entrepreneurship and opportunity (93rd), and social Capital (105th).

"The prosperity Index finds that India has

extremely poor healthcare,

failing to prevent systemic diseases or malnourishment,

it has a weak entrepreneurial infrastructure,

a poorly-developed education system,

nd extremely low levels of social capital," the report noted.

Besides, economy (44th) and governance (41st) are two measures on which India ranks highest.

According to the Institute, both scores are high as a result of high levels of public optimism with three-quarters of Indian citizens approving the government and also have high confidence on the country's financial institutions.

China ranks 30 places higher than India in the overall global rankings and outperforms India on the economy sub-index, where the Asia's second largest economy spots at 24th position.

While India trails in 44th position; and in the social Capital sub-index where China ranks 27th.

"The Legatum Prosperity Index is the world's only global assessment of wealth and well being.

It uses a holistic definition of prosperity, which includes factors ranging from economic growth to health and education, to personal freedom and governance," Legatum Institute Senior Fellow Ashley Lenihan said.

Meanwhile, on the lower end of the rankings were Zimbabwe (110), Pakistan (109), Central African Republic (108), Ethiopia (107) and Nigeria (106).

The Prosperity Index presents a broad view of wealth, happiness and prospects of the world's nations and citizens captured in eight sub-indexes.

The idea behind the Index is that material wealth alone does not make for a happy society, but happy citizens are produced as much by democracy, freedom, social cohesion and entrepreneurial opportunity as they are by a growing economy.