.... Risk averse banking' in credit deployment has to give way to ' responsible banking' complying with the twelfth plan vision. The global risks are transmitted to the financial market mainly by volatile capital flows and crude oil price through the exchange rateinterest rate channel. To minimise this risk, the action of monetary policy has to be complemented by a relevant fiscal and external sector policy. The way forward Assuming that the above mentioned risk factors have been managed by stakeholders, the following three monetary policy objectives, viz., to encourage investment, anchor medium term inflation expectations and improve liquidity conditions to support growth, have to be achieved. In this context, can we envision an 8% growth, 6% inflation, 6.5% policy repo rate and 3% CRR by 2014- 15? To conclude, frontloading of monetary policy through rate reduction should be avoided and the ' baby steps' approach may be considered......
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