Financial innovation involves development of new financial services and products. And these new products and services need to be more easily accessible. So, financial firms have to innovate to broaden access to their services. Greater financial inclusion is a must. The spread of micro finance is one method by which financial inclusion is being sought to be achieved. Innovation involves risk.
The central banking community needs to understand better the implications of these structural changes for growth, employment and inflation dynamics, so as to deliver more effectively on their mandate. That’s why it is important to assess systematically how these transformations affect our longerterm monetary policy strategy. Many central banks are reviewing their monetary policy strategy and some do it regularly.