For example, maximum intraday credit extended to NISS participant was about 14 percent of the settlement value in June 2003; this ratio has come down to about 6 percent in April this year. These reforms were mainly meant to improve the ability of the central bank to manage the liquidity of the monetary system and to manage risk exposures.
If we act too hesitantly, we run the risk of having to tighten monetary policy much more severely further down the road. And that would place an even greater strain on economic activity and the financial system. This would happen, for example, if inflation expectations became unanchored and a price-wage spiral emerged.