policies that many emerging markets put in place during the most expansionary phase of advanced economy monetary policies. we have policy space today due to our preventive, cautious and prudent policies that preserved macro - financial stability through the adoption of a pragmatic approach towards capital inflows over the last few years. it is now a well - understood and documented story : ample global liquidity due to easy monetary policies in advanced economies resulted in exceptionally intense capital flows to emerging market economies. and we know that large and volatile capital inflows can potentially lead to economic and financial instability. they are associated with excessive credit expansion, lower quality of loan origination, increased financial system exposure to exchange rate risk, asset price distortions, including excessive exchange rate appreciation, bis central bankers ’ speeches and inflationary pressure, as excessively easy global monetary conditions can boost domestic demand independently from the desired domestic policy stance. in a nutshell, excessive flows are a fertile terrain to grow excessive financial exuberance. the textbook policy response for my country and other emes was to use its floating exchange rate regime, which helps to smooth economic and financial adjustments, while conducting sterilized interventions and international reserves accumulation, which reduces exchange rate volatility and builds a foreign currency liquidity buffer to prepare for reversals. but the intensity of this inflow episode was special as were the circumstances and policy responses in advanced economies1. therefore, brazil and other emerging markets pragmatically complemented their response and other textbook ( aggregate demand ) policies with the implementation of specific macroprudential policy measures to prevent the exuberance deriving from these large inflows to threaten financial stability. the adoption of specific measures of this new toolkit obviously depends on how each of us assesses its own local credit and asset market potential vulnerabilities. some emes imposed tighter limits on financial institution and household leverage. in east asia, for example, policies included loanto - value and debt - to - income ceilings on real estate lending. in brazil, we increased capital requirements on riskier consumer loans and imposed a minimum payment floor on credit card balances. and we also imposed taxes on capital inflows and a reserve requirement on banks ’ foreign exchange spot positions. the important outcome was that this pragmatic response worked. therefore, macroprudential measures, including those that target specific capital flows directly, became an important part of the policy framework to address sudden floods and sudden stops. in complement to

msmes needs to be evolved. the industry associations have often been often representing on the delayed payments from large corporate. while banks have been advised to allocate a sub - limit in respect of large borrower accounts, for making payments to the mse units against purchases from them but it is not possible for banks to force the large buyers to utilize the limit for making payments. this problem could be institutionally tackled by factoring. the prime minister ’ s task force on msmes also has recommended that a suitable framework for promotion of factoring services without recourse in the country for msmes. reserve bank has also constituted a working group on securitization of trade credit receivables to examine various options for liquidating the receivables before maturity. there is 96 % exclusion of the small entrepreneurs, it is, therefore, imperative that they are financially included and brought in the formal banking system, the goi, based on the recommendations of the pm ’ s task force on msmes has decided that there should be an annual growth in the number of micro enterprise accounts be for the present fixed at 10 % for banks to achieve and also strict adherence by banks to the allocation of 60 % to micro enterprises of the total mse lending which should be done in stages viz. 50 % in the year 2010 – 11, 55 % in 2011 – 12 and 60 % in the year 2012 – 13. necessary instructions are being issued shortly to the banks in this regard and reserve bank will monitor the performance of banks. 20. the various fora set up by reserve bank, such as the empowered committees, and the standing advisory committee, state level banker ’ s committee meetings etc. meet at periodic intervals to monitor the credit flow to this sector. it is necessary that the efficacy of such fora / meeting are monitored to assess the impact at the ground level. 21. with increasing competition, introduction of new products and stringent regulatory environment, the role of banks needs to change from mere lenders to partners in business. there is a need for greater participation of banks in the affairs of their constituents by convergence of credit services and non credit services. the banks should not only provide differentiated products for msmes, but also provide counselling & guidance to new and established businesses, extending marketing support etc. similarly, the government and other institutions entrusted with development of the msme sector need to focus providing an enabling environment, infrastructure and forward & backward linkages so that the credit function being discharged