##mal jalan. the members of the committee were dr. subir gokarn and dr. rakesh mohan, both former deputy governors, dr. a vasudevan, former executive director, dr, amitava bose of iim, kolkata and prof. dilip nachane of igidr, mumbai. the staff members and consultants in the history cell in the reserve bank, under the guidance of executive director deepak mohanty, produced this volume with exemplary diligence, intelligence and commitment. i want to place on record my deep appreciation for the work of the advisory committee, the staff and consultants. they are going to be more influential than they realize. 22. finally, prime minister, sir, thank you very much indeed for agreeing to release this volume of history today. it means a lot to all of us in the reserve bank. 23. may i now request dr. jalan who provided enormous intellectual leadership for steering the writing of this volume of history to share his thoughts with us? bis central bankers ’ speeches

crisis ruptured the credibility of the decoupling theory by engulfing almost every part of the world. india was no exception. the crisis spread to india through finance and real channels. 9. importantly, the crisis also spread through the confidence channel. however, in sharp contrast to global financial markets which got paralyzed on account of a crisis of confidence, indian financial markets continued to function in an orderly manner, even as the risk aversion of the financial system increased and banks became cautious about lending. the point to note is that, the global financial crisis did not pose any major threat to the banking system in india at any point of time. as such, the need for any special measures pertaining to deposit insurance did not arise. however, in line with the global trend, there was also some demand here to increase the deposit insurance cover. if one looks even at broad data, it becomes quite clear that this demand had no persuasive force. under the existing insurance cover, number - wise almost 90 per cent of the deposit accounts are fully covered. amount - wise, over 60 per cent of total insurable deposits are covered. we determined, therefore, that the cost - benefit calculus was not in favour of enhancing the deposit cover. 10. in india, the contagion of the crisis was effectively contained by coordinated fiscal and monetary measures taken by the government of india and the reserve bank respectively. the results are evident from the marked improvement in the performance of the industrial sector in recent months – upturn in domestic and external financing conditions, revival of capital inflows, increased activity in the primary and secondary capital markets, softening of interest rates and substantial easing of liquidity conditions. gdp growth of 7. 9 per cent during the second quarter of this fiscal ( 2009 – 10 ) was robust – up from 6. 1 per cent in the previous quarter. there are, however, several challenges on the way forward including the timing and sequencing of exit from the expansionary fiscal and monetary policies. these issues are being debated all over the world and occupy the central place in our policy matrix too. the challenge for the reserve bank is to support the recovery process without compromising on price stability. financial stability 11. the global financial crisis has also underlined the critical role of central banks in systemic oversight of the financial sector and in preserving financial stability. this calls for a paradigm shift not sector. financial stability needs to be understood and addressed both from the micro and macro perspectives. at