This text seeks to provide a coherent explanation as to why the policies of financial liberalization and financial intervention have been unable to achieve the goal of improving the access of borrowers to the loan market, irrespective of size. This is one of the prime criteria for achieving efficiency in the operation of the loan market and its failure has resulted in increased uncertainty and financial fragility. Basu develops a theory of credit rationing which provides a theoretical explanation as to why neither policy has worked. He introduces two concepts, namely credit standard and credit risk, in order to explain why bankers ration credit to some, while quite willingly offer loans to others. He then uses these two concepts to show why the implementation of either policy involves forcing or inducing the banking sector to relax its credit standard requirements. This in turn increases credit risk to an unprecedented level, thereby engendering either financial crisis or financial fragility. The author employs empirical evidence from both India and South Korea to demonstrate how these scenarios can unfold.