country will inform the choice of policy instruments. in such a milieu, there cannot be any common code or uniform approach to capital account liberalization. 17. there has been considerable focus on macro - prudential measures ( mpms ) in the recent period. however, while legitimacy of mpms has been well established, the same legitimacy for capital flow measures ( cfms ) has not been universally accepted despite an explicit endorsement by the imf for selective use of cfms. it is important to recognize that amid global financial cycles and the inexorability of the trilemma, corner solutions are not feasible. so soft capital account management becomes a necessity – keeping external debt within practicable limits and prudence regarding the external sector help strengthen financial and macroeconomic stability. 18. the challenge before us is to identify what is going to strike us next? hence, any regulation of the financial system should take a pre - emptive approach, and consider the potential fragility of banks alongside all other elements of the financial system. this would prevent regulatory arbitrage and help to ex ante determine the supervisory “ guide rails / rules of the game ” for the system.

exposures to single borrowers or borrowers in the same corporate group and forcing the large borrowers to meet their fund requirements from market borrowings rather than from banks. under the circumstances, it would make sound commercial sense for the banks to look at msme sector as a potential growth area. 5. therefore, with favourable ecosystem in the manufacturing / services sector, msmes can pave the way for fulfilling entrepreneurial ambitions and in the process would be able to generate significant levels of employment. yet providing adequate and timely finance at reasonable rate of interest to these 50 million units at the bottom of the pyramid has remained an elusive goal. it must be appreciated that to realize the country ’ s aspirations for a double - digital growth, it is crucial that the potential of msme sector is optimally tapped. 6. before coming to the theme of the summit proper, let me briefly touch upon few major reasons for the sector ’ s limited access to institutional credit. these include – small ticket size loan which renders these accounts operationally less profitable, lack of information about the operations of these enterprises and financial illiteracy among the small enterprise owners. due to unavailability of timely as well as flexible institutional credit, a number of msmes fail to tide over temporary setbacks and eventually have to shut shop. with the above background, in my address today i intend to outline some mantras for the bankers and the borrowers that need to be pursued for ensuring vibrancy of the msme sector in emerging environment. i will also dwell upon 1 / 6 bis central bankers'speeches few recent policy measures that rbi and government of india have taken for the sector and also some measures in the pipeline. mantras for bankers 7. in my opinion developing empathy for micro, small and medium borrowers and understanding their financial and other related needs is the first and foremost mantra for the bankers. this can obviously be achieved if the top management is convinced about the potential of the sector and treats msme lending as a priority for sound commercial reasons. developing business sensitivity towards such entrepreneurs would require focused capacity building through training interventions. a ) appreciating the life cycle needs of the msmes micro and small units are more prone to financial difficulties than large enterprises / corporates. often absence of timely support at crucial junctures during the operating lifecycle of msmes leads to their sickness. the banks need to be sensitive in providing continuous support to viable mses during phases of transient financial difficulties. towards this