Moreover, as is being proven now, loose monetary policy is like “Chakravyuha”, the famous battle formation in the epic “Mahabharata” where it was easy to enter, but difficult to exit. 13. Let me now turn to the reforms aimed at the banking sector. Global reforms 14. The banks in Europe and the USA entered the financial crisis with highly –leveraged balance sheets.
They were too thin on equity and the balance sheet was too precariously placed to withstand write-down on their investments in complex derivate instruments. The situation was somewhat better in the developing world, but even the banks in these markets got impacted as the pains of the real economy slowly started to inflict the financial economy.