three projects show that the central bank is also moving rapidly to harness the power of new technology. we are working closely with our commercial banks and the mauritius bankers association to ensure that these potentially disruptive projects proceed smoothly. afrasia is now stealing a march over its local peers. i had urged afrasia, at the launching ceremony of the bank, seven years ago, “ bank prudent, always! ” these words of caution ring even truer today, in the aftermath of a little accident afrasia has had recently in zimbabwe. domestic depositors ’ money was never at risk. the central bank had taken extra pains to ensure that “ ringfencing ” was in place before we gave our green light to this overseas foray. and, just to make assurance doubly - sure, we had also insisted on, and secured, a capital buffer – the kind of approach that will become more common once basel iii kicks in. i note that the zimbabwe issue is being adequately addressed, in consultation with the host regulator. on looking back on the afrasia / zimbabwe problem, one can wonder how the central bank could have been so pre - scient … but were we really pre - scient? i would like to believe it was more a case of prudence, not pre - science. the bank practices what it exhorts its regulatees to do : “ bank prudent, always. ” i acknowledge that you at afrasia bank differently. the evolution of your off - balance sheet business is very telling – it does show that your appetite for risk is different. there is nothing wrong with that. but, shareholders, directors, and executives of afrasia should always remember that their bank does not operate on a stand - alone basis, that it is one of several players, that it is part of a system, and that any laxity can spread contagion and inflict reputational damage to the jurisdiction. bis central bankers ’ speeches our relationship with afrasia has often been marked by tension, occasionally by mutual incomprehension, but i know that you never doubted our motivation. you learnt to work with a regulator which you found intrusive at times. we at the bank had to learn to work with a bank that was constantly pushing in new directions – and in the process, pushing my bank inspectors beyond their comfort zone. but it has been worth it. starting from a standing position, your bank has determinedly made its way up. your growth has been

the likes of the us and the uk. the rupee exchange rate index, meri1 and meri2, which the bank rolled out in 2008, declined steadily since may last year indicating an appreciation of the rupee. at the end of the year, the build - up of supply pressures arising from reduced demand from importers contributed to an acceleration in the appreciation of the rupee against major currencies. the strong rupee was definitely benefiting the consumer in our import - dependent economy but export - oriented enterprises and the tourism sector began to feel the pinch and murmurs of impending massive layoffs became louder. we also observed that the volume of transactions in the foreign exchange market was on the low side compared to the same period in the previous year as forex sellers began to hoard their currency. we actively engaged in discussions with the treasury, the mauritius bankers association, the mauritius exporters ’ association and the association des hoteliers et restaurateurs de l ’ ile maurice to come up with a win - win solution that would neither distort the forex market – nor, for that matter, worsen the excess rupee liquidity which we have also had to reckon with for much of the year. we thus devised a made - to - measure mechanism in the form of short - term foreign currency swaps which we introduced just before christmas to inject liquidity in the market, thereby avoiding the uncertainties that could have had financial stability implications, while also offering the option of t - bills on tap to mop up any resulting excess rupee liquidity. banking sector performance our banking sector emerged virtually unscathed from the global financial crisis. while bank failures made the headlines in other countries, our banks weathered these difficult times without any systemic or institutional failures. banking sector assets declined very slightly by 0. 4 per cent while banking deposits increased by 2. 1 per cent between december 2008 and december 2009. there were no visible signs of credit constraint, as advances increased by 3. 2 per cent over the same period. overall profitability continued at satisfactory levels with a healthy year - on - year growth of 11. 3 per cent posted for the year ended 30 june 2009. our two major domestic banks recorded remarkable profit levels during the past financial year. this is, in my view, a great accomplishment and speaks volumes for the state of our banking industry and for the resilience of the real sector in our country. i cannot keep mum on the recent “ downgrad