in addressing the trilemma. in the technical sessions, the first session on “ conducting monetary policy post - crisis : challenges to transmission mechanism and operating framework ” focused on whether the framework of monetary policy needs to be re - designed in the light of lessons drawn from the crisis. leading the discussion, professor benjamin friedman drew attention to the interplay between financial stability and responsive monetary policy. he suggested that one has to look into the three building blocks of macroeconomic and financial policy - set, in order to prevent the recurrence of crisis. the three elements of the policy - set are : one, monetary policy centered on an active use of short - term interest rates ; two, an intermediation system built on banks and other deposit - type institutions with significantly leveraged balance sheets and three, asset markets characterised with open entry and free trading. prof. friedman articulated that if these policy mix sow the seeds of the crisis, there is a need to change the policy mix. bis central bankers ’ speeches professor eswar prasad argued that central banks need not be constrained by the orthodox one instrument one target framework but need to explicitly address the financial stability concerns. he argued that under more realistic conditions of imperfect markets and credit constrained consumers, flexible headline inflation targeting could be the optimal monetary policy framework. in the indian context, mr. deepak mohanty provided evidence that policy rate increases have a negative effect on output growth with a lag of two quarters and a moderating impact on inflation with a lag of three quarters and the overall impact on inflation persists through 8 – 10 quarters. summarising the first session, mr. h r khan, deputy governor emphasized that the orthodoxy that central banks should restrict themselves just to setting interest rates and not regulate or supervise financial markets has come under question since the financial crisis. dr. subir gokarn, deputy governor highlighted three important messages from the session : one, monetary policy framework should not be locked into single target, two, more flexibility in defining objectives and instruments is necessary, three, boundary conditions for policy environment keep changing, but transmission within the boundary conditions is what a central bank could aim at. the second session was devoted to the theme, “ impact of crisis on sovereign debt : implications for macro - economy and inter - linkages with other policies ”. in this session, frank smets suggested that large scale asset purchase programs can lower long term interest rates. but there is a risk that the central bank could lose its hard earned credibility

of debit / credit cards, etc. by both sophisticated and technologically uninitiated customers forces banks to lay due emphasis on automated system for frauds detection based on advanced algorithms, rather than excessive reliance on manual process. besides, customer education, particularly, of the large number of first generation customers is the responsibility that banks must take upon themselves and educate these customers, for example, about does and don ’ ts of online and mobile banking. 17. a truly effective security management will require the layering of a number of solutions that focus on people, process, technology and risk. the management of each layer will need to be based on its context among the diverse capabilities and limitations of the others. when all the layers are combined, it creates a powerful tool that can offer banks a much more successful way to manage their security challenges than any single stand - alone solution. given that sharing the cyber attack experience among banks and drawing lessons is very critical, it is important that banks are proactively engaged with indian banks – center for analysis of risks and threats ( ib - cart ) of the idrbt for incident sharing and benefiting from each others ’ experience. at the end, an effective interplay of seven s ’ s viz. strategy ( in terms of long term objectives ), surveillance ( as there is no substitute for eternal vigilance ), sharing ( of experience without which individual cyber breaches will snowball into systemwide epidemic ), sensitisation ( of cyber risks as a serious issue from the top to the bottom of the organization ), simulation ( by way of scenario building for possible situations of bis central bankers ’ speeches vulnerabilities ), safeguarding ( of customers ’ interest and organization ’ s reputation ) and skill ( technical, legal and operational skill upgradation and orientation of the staff ) should form the bedrock of a robust it security system. operational issues in it infrastructure 18. coming to the it infrastructure and operational aspects of it implementation, banks were beset with numerous issues as enumerated in the working group on “ information security, electronic banking, technology risk management and tackling cyber frauds ” ( chairman shri g. gopalakrishna ). as this has been discussed in the seminar, i would like to list only a few points, which need more attention by banks : a. the requirements of trained resources with requisite skill sets for the it function need to be understood and assessed appropriately by every bank. a periodic assessment of the training requirements