The turmoil in world financial markets has improved the prospects for India’s financial sector, according to experts.
“In developed economies, the losses that many banks have made in recent years and the task they now face to deleverage, rebuild capital and comply with the new Basel regime means they are constrained in their ability to lend. While banks in developing markets like India have proved resilient, there is a need to expand the sources of capital available for the economy. That means greater reliance on capital markets,” said Deven Sharma, president of Standard & Poor’s and chairman of Crisil.
This would ensure good scope for growth and would be the new normal for India, he said. He was speaking at a seminar on “The New Normal: the Changing Face of the Financial Markets”.
Indian banks have not been found involved in over-leveraging and complex financial products. Rather, “they will become more sophisticated, issuing complex products and became more transparent,” said Roopa Kudva, managing director and chief executive officer, Crisil.
This means India’s financial sector will not mirror the trends in advanced economies, where financial institutions are reducing leverage and becoming less complex. However, the degree of integration with global markets will improve, as the need for more funds for infrastructure companies will drive them to global markets to raise funds.
Explaining the new normal, Kudva said, “The capital market regulator will insist more on transparency and be more focused on investor protection. The markets will be further institutionalised.”
She avoided direct replies to questions on the proposed super-regulator in view of the recent controversy on regulating unit-linked insurance plans. She said rather then having a super-regulator, each markets should have its own regulator.