may take due care to ensure that credit growth at the overall, sectoral and sub - sectoral levels remain sustainable and all forms of exuberance are avoided. expansion of the credit portfolio itself and pricing of the same should be in sync with the risks envisaged. banks and nbfcs also need to further strengthen their asset liability management. they may give greater attention to their liabilities side. in certain cases, we have observed increased reliance on high cost short term bulk deposits while the tenure of the loans, both in retail and corporate loans, is getting elongated. 4 / 6 bis - central bankers'speeches second, given the increasing importance of non - bank financial companies ( nbfcs ) in the financial system, 7 the increasing interconnectedness between banks and non - banks merits close attention. nbfcs are large net borrowers of funds from the financial system, with their exposure from the banks being the highest. banks are also one of the key subscribers to the debentures and commercial papers issued by nbfcs. nbfcs also maintain borrowing relationships with multiple banks simultaneously. needless to state that such concentrated linkages may create a contagion risk. though the banks are well capitalised, they must constantly evaluate their exposure to nbfcs and the exposure of individual nbfcs to multiple banks. the nbfcs on their part should focus on broad basing their funding sources and reducing over - dependence on bank funding. third, microfinance has emerged as an important financial conduit to foster financial inclusion. as micro finance institutions ( mfis ) are catering to the marginalised clientele, they have to bear in mind the affordability and repayment capacity of the borrowers. though the interest rates are deregulated, certain nbfcs - mfis appear to be enjoying relatively higher net interest margins. it is indeed for micro finance lenders to ensure that the flexibility provided to them in setting interest rates is used judiciously. they are expected to ensure that interest rates are transparent and not usurious. fourth, the increased collaboration of banks and nbfcs with fintechs is facilitating introduction of innovative products and services and new business models. digital technologies are offering a powerful medium to access banking and financial services. this has also brought down the operational costs and helped in enhancing the reach of financial services providers. an important aspect that merits attention in this context is with regard to model - based lending through analytics. banks and

, and later it turned out that some banks had eased their credit conditions far too much. so a rise in lending is not immediately on the cards. credit institutions operating in such a market should be particularly thorough when assessing potential borrowers. this includes taking into account the fact that house prices can fluctuate considerably. when the housing bubble of the 2000s burst, it became clear that a maximum ltv ratio of 80 per cent for mortgage loans does not necessarily ensure that the value of the home exceeds the value of the mortgage loan when prices fall. if we look at the mortgage statistics, we can see that lending is increasing most strongly in the urban areas, which is hardly surprising as this is where the largest house price rises are seen. demand for loans is also highest in these areas. but new loans are also being granted in rural areas, and the number of municipalities where extraordinary prepayments are exceeding new lending is very small. this indicates that if there is sufficient collateral to mortgage, loans are granted. no matter where the property is located. the challenge of declining populations in some areas is not solved by granting more credit. * * * turning to monetary policy, the beginning of the year was unusually eventful. following the decision by the swiss national bank on 15 january to discontinue the minimum exchange rate for the swiss franc against the euro, we saw an unprecedented increase in demand for danish kroner. against that background, danmarks nationalbank took a number of unusual steps. we intervened in the foreign exchange market by selling kroner for a larger amount than ever before in our history, and the benchmark monetary policy interest rate – the rate of interest on certificates of deposit – was reduced to – 0. 75 per cent. on the recommendation of danmarks nationalbank, the ministry of finance also suspended issuance of danish government bonds temporarily, and finally an extraordinary increase of the limit on the monetary policy counterparties ’ current account deposits at danmarks nationalbank was introduced. these measures had the desired effect. the krone remained stable close to its central rate, and towards the end of february the inflow of foreign exchange ceased. in recent months, the situation in relation to the krone has gradually normalised, and danmarks nationalbank has sold foreign exchange in the market for a considerable amount. on the recommendation of danmarks nationalbank, the ministry of finance has therefore decided to resume issuance of government bonds effective from october 2015. at the same time, the