to external shocks soundness. the sector has also benefited from the strengthening of supervision and regulation of the banking system by the bank of uganda. there has been continued strong public confidence in the sector and increased product diversification by financial institutions. all banks are adequately capitalized and the value of non - performing assets as a percentage of total lending remained well below 3 % as at june 2007. the low ratio of non - performing assets to total credit portfolio is due to improved risk management by banks and strengthened supervisory framework. the housing finance company of uganda ltd. was recently upgraded into a full - fledged bank, and a number of banks from abroad have made applications to bank of uganda for licenses to set up commercial banks in uganda. the bank of uganda has already licensed the continental trust bank from nigeria whose shareholders also invested in the national insurance corporation, and the kenya commercial bank, which will start their operations soon. i am pleased to announce that just this morning i approved the application of another large nigerian bank, the united bank for africa plc to open commercial banking business in uganda. all this is very good news for the development of our financial sector. we should thank the government for providing the enabling environment for foreign and local investors alike. in conclusion, i once again wish to congratulate orient bank limited upon this auspicious occasion of launching the orient express visa card and further wish the bank prosperity in all its efforts to render innovative financial services to the public. finally, it is now my privilege and pleasure to launch the orient express visa card.

the channels – financial, real and more importantly, the confidence channel. taking cognizance of deteriorating economic and financial conditions, the reserve bank, like most other central banks, took a number of conventional and unconventional policy measures to contain the adverse spillover of global developments. these included augmenting domestic and foreign exchange liquidity and a sharp reduction in the policy rate. the government also supported the economy by fiscal stimulus packages, reversing the earlier efforts at fiscal consolidation. mohanty, deepak ( 2014 ), “ unconventional monetary policy : the indian experience with crisis response and policy exit ”, rbi bulletin, vol. lxviii no. 1, january. bis central bankers ’ speeches supported by substantial monetary and fiscal stimulus, the domestic economy recovered quickly. in the process though, inflation also picked up, partly aggravated by spurt in global commodity prices, particularly oil ( table 1 ). consequently, the reserve bank shifted policy focus to exit from accommodative monetary policy in a calibrated manner. fiscal policy was also tightened. at the same time the economy was confronted with a number of supply constraints. in this process growth slowed, inflation still remained at levels not conducive to sustained high growth and current account deficit expanded which made the indian rupee more vulnerable to external shocks. in the financial year 2012 – 13, growth had slowed to its lowest level since 2003 – 04 at 4. 5 per cent, current account deficit ( cad ) had expanded to its highest level at 4. 7 per cent of gdp, gross fiscal deficit of the central government was 4. 9 per cent of gdp and consumer price inflation remained in double digits. hence, macroeconomic conditions were weak. into the financial year 2013 – 14, volatility in the financial markets returned following the announcement in may 2013 of the fed ’ s intention of likely tapering of qe. the impact of announcement of tapering was evident in the form of tightening of liquidity and higher volatility in all market segments along with sharp decline in stock prices. portfolio capital inflows which were buoyant till the third week of may 2013 began retreating as us yield rates hardened and yield spread narrowed significantly ( chart 4 ). bis central bankers ’ speeches at the time when the tapering was announced, domestic concerns pertaining to high cad, low growth, high fiscal deficit, high inflation and policy uncertainty were already major concerns for foreign investors. this apparently amplified the impact of tapering announcement on