was intended to ensure that the contribution of this monetary instrument is also aligned with the monetary policy stance implied by the key interest rates. looking forward, the governing council has reinforced the importance of a datadependent approach to the subsequent policy rate decisions, taking into account the elevated level of uncertainty brought about by recent financial market tensions. the council ’ s reaction function and its future decisions will be guided by the evolution of the inflation outlook, in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. with risks to medium - term price stability increasing sharply in 2022, the pace and scale of the adjustment of the official interest rates has been unprecedented. as the hiking cycle is progressing further, the ecb governing council will need to find the right balance between two risks : the risk of stopping too early before the “ job is done ”, which could cause inflation to remain persistently elevated and entrenched in price and wage setting processes, and that of overtightening monetary conditions, which would result in significant repercussions for economic activity, financial stability and, ultimately, medium - term price developments. given the high volatility observed in financial markets over the last few weeks, including the shocks generated by the dismal bank developments in the united states and in switzerland, and considering the substantial amount of tightening in the pipeline, a cautious approach should guide future monetary policy decisions, also from a financial stability perspective. this does not mean that monetary policy will be subject to financial dominance ; quite on the contrary. it simply reflects the fact that price and financial stability are two strictly intertwined goals, as also the recent drop in market - based inflation expectations clearly signals. this also explains why effective regulation and diligent supervision are needed, as are backstops for crises. monetary policy, however, should not be, nor should it be perceived as being, the only game in town. indeed, as we have seen, inflation expectations do not only reflect the actions of the central banks : the return to price stability and the anchoring of inflation expectations will, in particular, greatly benefit from fiscal policies and negotiations between workers and firms operating in the same direction as monetary policy. what i stated at the beginning of this lecture must therefore be fully understood : the energy shock is like a tax on the euro area economy, which unfortunately cannot be returned to sender and cannot be circumvented through a fruitless race between wages and prices

districts of the country. the rbi has advised banks to open more mse focused branch offices at different mse clusters which can also act as counselling centres for mses. each lead bank of the district may adopt at least one cluster. a microfinance model which has been relatively successful is the shg bank linkage model which leverages the penetrative reach of the ngos and civil society organizations and the financial strength and managerial expertise of the commercial banks. starting from a modest scale as a pilot in the year 1992, the shg - bank linkage program linked 79. 60 lakh savingslinked self help groups ( shgs ) covering over 10. 3 crore poor households as on 31 march 2012. as per the nabard annual report, however, the concentration of the shg bank linkage model continues to be to the southern states and is not evenly spread over the bis central bankers ’ speeches bimaru ( bihar, madhya pradesh rajasthan and uttar pradesh ) states. the second model is that of the registered nbfcs. these work as profit companies and extend loans to the entrepreneurial poor at the middle of the pyramid. this is an important distinction which i want to emphasize as this brings into salience the continuing need and relevance of this model. there is an important role which both models of microfinance fulfill in the critical areas of training and capacity building of the poor. this enables them to graduate to larger loans and to setting up sustainable, scalable, self - sustaining enterprises and income - generating projects which pay for themselves. the most serious limitation of microfinance is that it does not address all needs holistically. there is a problem of scaling up, and in this lies the promise of inclusive finance which links the poor to the formal financial system. there is a clear comparative competitive advantage which commercial banks enjoy in extending microfinance. as financial inclusion and basic bank deposit accounts are in place, banks should now move to the next step of crafting products and services for the poor. the advantages of banks over mfis stem from their being regulated institutions fulfilling the necessary preconditions of ownership, financial disclosure and capital adequacy that help ensure prudent management. they have the physical infrastructure, large networked branches on cbs from which to expand access and reach out to a substantial number of poorer clients. they have well established internal controls and administrative and accounting systems to keep track of a large number of high volume, small value transactions.