such shocks and risks as well. the continuing high growth in private sector credit could also pose threats to price as well as financial system stability. first, it could deteriorate the quality of the assets of commercial banks and that situation could increase the risk of high non - performing loans in the future. second, such expansion of credit could generate inflationary pressures in the economy through increased aggregate demand. with the rapid and intense integration of the sri lankan economy with global financial markets, money laundering, terrorist financing and pyramid schemes could threaten financial stability. therefore, continued regulatory vigilance and timely interventions would be necessary to avoid and / or mitigate any harmful effects of all such threats. it should also be noted that a continuing high budget deficit could also pose a formidable challenge in the conduct of monetary policy, as such deficit requires borrowings by the government from the banking system, making it difficult to maintain the monetary expansion along a pre - determined, tight path. as seen from the case studies of many successful countries, rapid infrastructure development is a strong contributory factor towards achieving sustainable high growth. however, the timely mobilisation of necessary resources for infrastructure development while maintaining budget deficits and debt at reasonable levels would be particularly challenging for a developing country like sri lanka. at the same time, maintaining a comfortable and reasonable level of foreign currency reserves in order to be able to mitigate the impacts of external shocks is also a challenging task for any developing country. needless to say, it is vital to manage the foreign reserves at an appropriate level, while ensuring that the exchange rate fluctuations are within reasonable limits, in order to enhance the confidence in the economy. these and other challenges would need to be faced by our country and it is clear that our policies and actions would have to be so designed in order to deal with, and respond to, such challenges if we are to be successful. 5. monetary policy strategy in 2007 and beyond monetary policy is the mechanism that is used by central banks all over the world to direct an economy along a non - inflationary, growth path. such policy would ideally be supported by a series of other policies and strategies as well. the policy framework adopted by the central bank of sri lanka is a monetary targeting framework with reserve money as the operational target and broad money ( m2b ) as the intermediate target 1. such targets are carefully computed and set after taking into consideration, the potential growth and after assessing the liquidity needs of the economy to move along the projected growth path while

factor in exact needs of customers and suitability / appropriateness of products being launched for them. the credibility of a bank ’ s grievances redress mechanism is dependent on the robust, responsive and reliable nature of this structure. the number of complaints actually never tells the true story. the customers and staff alike must be encouraged to bring on board every service deficiency. we seem to take very defensive and evasive action when it comes to admitting service deficiency. while institutionalizing such structures for monitoring customer service at various levels, right from the board to branch levels, rbi has always insisted on the following aspects : ( i ) customer inclusiveness by co - opting customer members in branch level customer service committees to generate feedback, which would in turn, trigger fresh initiatives and inventions in customer service and ( ii ) an appropriate product approval process overseen by the board level customer service committees to determine suitability and appropriateness of products being launched so as to target appropriate customer profiles. further, for any and every kind of service deficiency, apart from the grievances redress mechanism, what is the compensation policy that the banks have put in place? the compensation must be timely, adequate and effective. in many situations the payment of compensation for lapses on the part of the banks is viewed purely from the staff accountability angle, leaving the customer in the lurch for months. this attitude must change. what kind of balance can be struck between competition and correctness? are customer service and compliance mutually exclusive or inclusive? here, i would talk about implications of compliance for privacy, customer awareness and customer protection. privacy and compliance while uniform application of rules, regulation and direction across banks will possibly pave the way for good customer service, there is need for striking a balance between privacy and compliance. the recent customers ’ resentment of compliance, perceived to be bordering on intrusion with regard to updating kyc information is a case in point, as they included details like date of anniversary of customers, number of foreign trips undertaken, etc,. thus, overcompliance can probably kill customer service. bis central bankers ’ speeches customer awareness and compliance another aspect that needs attention in the context of compliance could be customer dissatisfaction stemming out of non - comprehension of underlying regulatory and supervisory guidelines ; this is where customer communication plays a stellar role in assuaging aggrieved feelings, calling for leveraging customer awareness for better compliance. customer awareness, education and interactive communication campaigns can go a long way in redressing and minimi