The unravelling of the global financial crisis sends a clear signal that India has to make fundamental changes in its management of the banking and financial sector. The first prerequisite is a return to relationship banking, the arrangement under which contacts between the lending bank manager and the borrower are direct and not impersonal. The immediate Indian response to the global crisis should be to work towards lowering interest rates which at their high level have hurt manufacturing investment in both the large- and small-scale sectors. The economy also needs the pursuit of an expansionary policy by waiving the fiscal rules.