Former RBI Governor Y V Reddy has received huge compliments from the country's top economic advisor for going slow on opening up new complex financial products, as the caution has helped insulate the country from global crisis.
"I would say that I told the former (RBI) Governor that his caution with respect to the banking system has actually paid off for the country. Caution in the sense of regulatory opening," Chief Economic Advisor Arvind Virmani told PTI here.
Reddy exercised caution in permitting complex derivative products, with which a large part of the legacy financial system is not familiar and needs to develop expertise in, he said.
Virmani expressed his feelings to Reddy through an e-mail recently.
"It has paid off since we face a once in a generation global crisis. Globally this is much worse than the Asian crisis," Virmani said.
RBI has recently allowed exchange-traded currency futures, initially with rupee-dollar pare, after much consultation and receiving inputs from the public at large.
Similar discussion paper was also floated for exchange- traded interest rate futures, expected to be launched by December-January.
Besides, there are other derviative products that exist which are not exchange traded. They include interest rate derivatives like Interest Rate Swap (IRS) and Forward Rate Agreement (FRA).
They also include Foreign Currency derivatives like Foreign Currency Forward, Currency Swap and Currency Option.
