2. 6 % is below 3 %, a level which is considered sustainable. the underlying idea is that current account deficit subsumes fiscal deficit in the sense that high fiscal deficit essentially connotes high public sector dis - saving which can be offset by private sector and house hold sector savings. it is significant in this context to note that indian economy has been characterized by increasing domestic savings rate financing investment, with domestic savings rate reaching a high of about 38 % of gdp in financing investment of 39 % of gdp in 2007 - 08. both the government and the reserve bank of india responded to the challenge in close coordination and consultation. the main plank of the government response was fiscal stimulus while the reserve bank's action comprised monetary accommodation and counter cyclical regulatory measures. monetary measures the monetary measures have comprised three elements : monetary easing by cutting policy rates, provision of rupee liquidity, forex liquidity and ensuring availability of credit for productive purposes. reduction in key policy rates • the repo rate was reduced by 425 basis points from 9. 0 per cent in october 2008 to the current rate of 4. 75 per cent. similarly the reverse repo rate was reduced by 275 basis points from 6. 0 per cent to 3. 25 per cent. provision of rupee liquidity • the cash reserve ratio ( crr ) was reduced from 9 % to 5 % of net demand and time liability ( ndtl ). the cumulative reduction in the crr by 400 basis points since mid - september 2008 released rs. 1. 6 trillion of primary liquidity. ( $ 32 billion ) • unwinding, redemption and de - sequestering of market stabilization scheme ( mss ) has released primary liquidity of rs. 1. 44 trillion. ( approx $ 29 billion ) • permanent reduction in slr by 1. 0 % of ndtl has released rs. 400 billion. ( $ 8 billion ) • an exclusive repo facility for supporting non - banking financial companies ( nbfcs ) mutual funds, and housing finance companies to the extent of rs. 600 billion. ( $ 12 billion ) • special purpose vehicle ( spv ) set up for extending assistance to nbfcs to the extent of rs. 250 billion. ( $ 5 billion ) • refinance extended to small industries development bank of india ( sidbi ) ( $ 1. 4 billion ), national housing bank ( $ 800 million ). • the actions of the reserve bank since mid - september 2008

of the cross - border banking framework and principles. the real test would be in translating the principles into detailed policies and action plans that are both sound and practicable. the main challenge in applying the new accord uniformly across the globe is, indeed the complexity of the framework itself. while the underlying intention of the framework to promote sound risk management and best practices is not in question, countries, particularly the emerging markets, are at different levels of readiness to cope with the extensive changes and potential implications of basel ii. given the different stages of development and levels of market sophistication, applying basel ii, that is designed fundamentally based on parameters and experiences drawn from developed economies, may not be appropriate without some customisation to better reflect the situation in the emerging markets. the low liquidity in some markets and the higher level of market volatility in most emerging markets may not be adequately captured in the underlying assumptions within the basel ii framework. it is therefore important to emphasise that such constraints and the need for some customisation must be well understood and acknowledged by foreign banks operating in emerging markets. in essence, the discussions on the cross - border implementation of basel ii will contribute towards avoiding the imposition of " one size fits all'solutions, and minimising the potential adverse implications of the differences in approaches in addition to avoiding the unnecessary duplication of efforts and investments. ladies and gentlemen, in many emerging economies, basel ii is seen as an important catalyst to accelerate the introduction of best risk management practices within the banking sector in the medium and longer term. while best practices that have been adopted by global banks have even surpassed the expectations of basel ii, this is not the case for most domestic institutions. in many emerging markets where the banking system is still highly fragmented, promoting the adoption of these practices throughout the entire industry will indeed be a challenge. such efforts would therefore need to be implemented within the agenda of the overall financial sector development programme in the individual countries. it is within this context that malaysia has chosen to adopt a flexible timeframe, underpinned by four key implementation principles : • first, for capacity building measures to be implemented ; • second, within these capacity building efforts, the emphasis on the enhancement of the risk management framework for all banking institutions ; • third, to emphasise on strong business justification instead of regulatory mandate in the adoption of the more advanced approaches ; and • finally, to enhance the supervisory methodology to assess the internal models and the advanced risk management systems. the rigorousness