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Newsletter Article, Issue #18: Know the Organization - Centre for Advanced Financial Research and Learning (CAFRAL)

An interview with  Mrs. Usha Thorat, Director, CAFRAL. In  this  issue, we get to know more about  CAFRAL’s aspirations and future plans in the area of Financial Research. Usha Thorat, former Deputy Governor, Reserve Bank of India, took over  as  Director of the Centre for Advanced Financial Research and Learning (CAFRAL) in January 2011. CAFRAL is promoted by Reserve Bank of India as a centre of excellence for research and learning in the field of banking and finance    

Picture Source: RBI Website

1. How would you describe CAFRAL? Where is CAFRAL positioned when you take into account all other organizations that research financial services in India with respect to key objectives, priorities?
a.    Key Objectives, Priorities
b.    Current Projects, Future possibilities

CAFRAL is an institution set up and supported by the Reserve Bank of India to evolve into a global centre for research and learning in banking and finance. Relative to other research institutions, I see CAFRAL as providing a leadership and catalytic role in research on the banking and financial sector on topics having implications for policy at the national and global level.

Although as a leading emerging economy India has a seat at the high table in various international fora on global finance, we have not been able to engage meaningfully in the debate and contribute significantly to the deliberations as we have not had sufficient research to back us. CAFRAL hopes to fill this void.

CAFRAL’s key objectives are to enhance  our understanding of how the financial sector contributes to real sector growth through in-house and collaborative research that is useful and relevant; to  enhance professional capabilities in the banks, financial sector, and among central banks regulators and policy makers through learning events and programs; to provide a platform for dialogue between policy makers, regulators, financial sector, practitioners and academics on issues of topical relevance and systemic importance; to communicate and disseminate the conclusions and results of the learning and research activities of CAFRAL to policy makers, central banks, regulators and public at large, and to collaborate and network with domestic and global institutions with similar mandate for mutually beneficial arrangements.

The focus of CAFRAL’s research is on financial markets, financial stability, risk management , financial regulation and financial inclusion. Obviously, all these subjects are intertwined and do overlap with the macro and micro economy. Given our special interest in the linkages and transmission mechanisms between the financial sector and real sector, several of our current projects relate to the area of credit markets, systemic risk and financial inclusion. Our future focus will continue to be in these area. We also hope to  put together a comprehensive data source for research on credit markets because (a) the current research activities of other Indian financial research organizations mainly focus on the capital and currency markets; (b) the Indian financial system is dominated by banks and, hence, the credit market is the largest financial market in India, and (c) our focus is on systemic risk and the associated reduction in credit availability with the potential for adversely affecting the real economy.

2. What scope or potential does CAFRAL see in collaborating or partnering with other research institutions? Would it provide a platform upon which research can provide better impact? If so, how?

As I mentioned, I see CAFRAL providing leadership and catalytic role in research on banking and finance through in house and collaborative research. Hence, there is huge scope for collaborating both in its research and learning activities with other institutions in India and abroad. We have already established an informal network of financial researchers and have got some of the leading academics and practitioners on our Research Advisory Committee. The research activity is quite new and there are several institutions in India already into research on finance for several years. We hope that in view of our unique positioning vis a vis the regulators, market participants and the banking community, we will be able to provide the bridge and the platform for academics to meaningfully collaborate with regulators and practitioners.

3. From your vast and rich experience at RBI, what is your take on the client aspect – is client education necessary? What needs to be done in promoting areas like client awareness of financial products as well as client protection? How is CAFRAL going to approach the aspect of Financial Literacy?

I consider client awareness and education as hugely important and part of honoring the fiduciary role of financial service providers. There is much to be done both for consumer education and for protection and redressal of grievances. It is equally important that providers of services are responsible in their provision of finance and apply the tests of suitability and appropriateness to the products delivered by them. This is an issue of value based finance as well as proper structuring of incentives. CAFRAL does not plan to enter the area of financial literacy, although we would be happy to provide a platform for thought leadership in this area. 

4. The role of technology has gained increased emphasis in recent times with the concepts of mobile banking and business correspondent model. How does CAFRAL view this? What are the opportunities and challenges that face practitioners with respect to the use of technology?

Technology is what has made what seemed a pipe dream now within the realm of reality viz. meaningful financial inclusion. However, making the technology interface customer friendly and secure is the need of the hour.

The Business Correspondent model was established to help expand the reach of the formal banking system. Deploying a range of technology platforms and solutions, it has established a presence in nearly 70,000 locations. Our studies indicate that, despite certain constraints, it has helped banking expand into remote villages. Moreover, for the introduction of direct benefits cash transfers by the Government , banks have to create a delivery mechanism, which now becomes possible through the use of technology , BCs and Ultra Small Branches.

5. Translating research into practice is a huge challenge. From our experience, we have noticed that communicating and convincing policy-makers with the backing of research results often proves to be a difficult affair. How is CAFRAL going to approach policy-makers and practitioners on this front – so that research can align itself with the overall Financial Inclusion agenda?

We hope to be able to produce high quality research – both in house and through collaboration – which will be useful to policy makers and indeed we would be happy to do research specially commissioned by the regulators. In fact, we conduct several round tables, conferences and workshops on policy issues where all views are expressed and communicated in a cogent fashion to the regulators without taking any stance on the matter. We do not see ourselves as an advocacy organisation.

While on the one hand, we are interested in producing high quality theoretical and empirical work for publication in high quality academic journals, on the other, we are interested also in publishing policy papers, and even newspaper articles, backed by the research we produce in an accessible language. For example, one such short piece on the regulation of systemically important assests and liabilities will appear at the web site This  a web site that provides research-based policy analysis and commentary from world’s leading economists. Another example is the financial inclusion article forthcoming in Economic and Political Weekly. It is on challenges to financial inclusion in India and based on our field research in some mandals of Andhra Pradesh.  


  1. CAFRAL is an institution set up and supported by the Reserve Bank of India to evolve into a global centre for research and learning in banking and finance. Relative to other research institutions, I see CAFRAL as providing a leadership and catalytic role in research on the banking and financial sector on topics having implications for policy at the national and global level. The Student Research Journal

  2. Is it the certified financial planner school or Center for Advanced Financial Research and Learning (CAFRAL), both are provided services and education knowledge in financial sector. CAFRAL as providing a leadership and catalytic role in research on the banking and financial sector on topics having implications for policy at any level. several institutions, school, colleges in India already into research on finance for several years.


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