The purpose of this paper is to determine how policymakers should answer incidents of financial crisis in India. It finds that in such times policymakers are faced with two critical tasks. These are to identify and appropriately address the problems critical to the crisis and secondly to ensure that the sector reaches a new equilibrium. It finds the primary task to be important given the resource constraints of policymakers and distinguishes it from addressing the causes of the crisis. The paper also suggests that to deal with the secondary task it is important the policymakers understand three fundamental pillars of financial sector stability and development. The importance and precise nature of these tasks are illustrated using evidence from the Indian Financial Crisis, Savings and Loans Crisis. In addition to identify these tasks, the paper proposes policy-making frameworks to deal with each of the identified tasks. These frameworks are developed from a critical reading of the related literature and a study of the cases reviewed.

Key Words: Indian Financial Crisis, Savings, Loan Crisis, Policy-making