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Regulation in India - Annotated Bibliography


The International Centre for Financial Regulation (ICFR) introduced itself to the business, regulatory and academic community in India on 8 February 2010 in Mumbai.

Please find below the annotated bibliography related to its launch in India.


1. Regulation:


Asian Corporate Governance Association Hong Kong (January 2010); ACGA White Paper on Corporate Governance in India

The aim of the “India White Paper” is to provide officials, financial regulators, listed companies, investors and others with constructive and detailed suggestions for the broadening and deepening of sound corporate governance in India. The White Paper focuses on, and makes recommendations with regard to, five key issues: (i) Shareholder meetings and voting, (ii) Related-party transactions, (iii) Preferential warrants, (iv) Corporate disclosure, and (v) The auditing profession.
 

Shyamala Gopinath (January 2010); Financial Markets – Some Regulatory Issues and Recent Developments.

In her speech on 4 January 2010 in Mumbai Ms Gopinath (Deputy Governor of the Reserve Bank of India) discussed broad issues relating to financial market regulation and reviewed the key developments in major markets in India and some unsettled issues. She emphasises the importance of macro-prudential regulation and highlights the importance of improving our understanding of interconnectedness in the financial system.
 

Duvvuri Subbarao (December 2009); Financial Inclusion: Challenges and Opportunities

The speaker emphasises the importance of the financial inclusion for sustaining equitable growth. RBI pursued efforts to further financial inclusion. This includes meeting the small credit needs of the people, giving them access to the payments system and providing remittance facilities. Towards the end of the speech, challenges and opportunities for the financial inclusion are looked at.
 

Shyamala Gopinath (November 2009); Philosophy and Practice of Financial Sector Regulation

Ms Gopinath in this speech recognises the importance of the renewed effort to redefine the regulatory philosophy. Systemic risk oversight and macro-prudential regulation have become the new touchstones for a repaired regulatory framework. The speech is divided into two parts: starting off with a discussion on the evolution of the financial sector regulation in India and then sharing perspectives on some of the key issues in the current debate on future of financial sector regulation mainly dealt with in detail in the Turner Review.

 

Usha Thorat (September 2009); Global Agenda for Regulatory and Supervisory Reforms: The Stock Taking and Way Forward

This speech first looks at the current macro-economic scenario and then goes on to closely examine the global response by sovereigns and regulators to the current financial crisis. Basel Committee`s comprehensive set of measures to strengthen regulation, supervision and risk management of the banking sector and Indian position in regard to financial regulation and supervision are reviewed.


Noble – City of London Whitepaper (July 2009); Life After the Great Escape – How India Needs to Use the Global Credit Crisis as a Platform for Reform

In this whitepaper, Noble and City of London consider India’s successful warding off of the global credit crisis, but emphasise the steps they believe are required to return to the high growth performance of recent years, involving the immediate initiation of meaningful reform.  It goes on to set out a number of areas, from reviewing the stability dividend that India currently gains from capital restrictions, to disinvestment in order to increase free float and market oversight over public sector entities and relaxing restrictions on Foreign Institutional Investors (FIIs).

 
Usha Thorat (June 2009); Impact of Global Financial Crisis on Reserve Bank of India as a National Regulator

  • Link to the article

RBI is a central bank that is entrusted with multi-dimensional roles. In this talk it has been analysed how the RBI responded to the global financial crisis with respect to several of its roles (e.g. RBI`s response as monetary authority, as forex manager, as regulator of Banks and NBFCs, as debt manager etc.).

 

2. Banking Sector:


Duvvuri Subbarao (February 2010); Challenges for Central Banks in the Context of the Crisis
  • Link to the article

In this speech, Dr. Subbarao sets out the major challenges to central banks in the wake of the crisis. There are five challenges to be addressed: (i) Managing monetary policy in a globalizing environment, (ii) Redefining the mandate of central banks, (iii) Responsibility of central banks towards financial stability, (iv) Managing the costs and benefits of regulation, (v) Managing the balance between the autonomy and accountability of central banks.


Subir Gokarn (January 2010); Financial Development and Deposit Insurance: Some Linkages 

In this talk, Subir Gokarn presents a broad vision for the financial sector development, which then provides a framework within which to view the evolving role of deposit insurance. Importantly, Gokarn emphasises five critical objectives as being relevant for the financial sector development: Efficiency, Stability, Transparency, Inclusion and Sustainability.  
 

Usha Thorat (January 2010); Risk Management – Priorities for the Indian Banking Sector

It is believed that the crisis has thrown up some critical issues relevant to risk management policies. The author also turns to the key areas where banks need to focus while planning their businesses for higher growth. Basel Committee brought out in December 2009, two consultative documents focusing on higher bank capital requirements, liquidity, leverage ratio, measures to deal with procyclicality, and many others. In this talk, the Indian present position in this regard is assessed.

 Dr. K. C. Chakrabarty (August 2009); Banking and Finance in India: Developments, Issues and Prospects

In the beginning of this talk, Dr. Chakrabarty touches briefly upon the global banking trends in view of the present financial and economic crisis. Role of banking and financial system in the economy and the progress on financial deepening in India is also examined. In the end, Dr. Chakrabarty continues to talk about developments in the Indian banking and financial arena.

 ICMA Centre – City of London (February 2008); The Development of India’s Corporate Debt Market

This document focuses on the potential for development in the Indian corporate debt market.  It reviews the benefits of the creation of a corporate debt market, and the importance of having such a market in the growth of a global financial hub (such as Mumbai is wishing to become).   It argues that there is not currently a true corporate debt market in India, and looks at the reasons behind this; and suggests some reasonably swift recommendations to move the market forward.

Dr. Ganguly Group (June 2002); Report of the Consultative Group of Directors of Banks/Financial Institutions – Implementation of Recommendations

In this report the Group of Directors of Banks and Financial Institutions made recommendations for effective functioning of banks. Certain recommendations require approval of the Government. The recommendations fall into three main parts: (i) Recommendations which may be implemented by all banks, (ii) Applicable only to public sector banks, and (iii) Applicable only to private sector banks.


Narendra Jadhav; Emerging Issues in Banking and Financial Sector in India

The author looks at the financial system development in India and examines issues and concerns that appeared as a result of it. The major financial sector reform process in India initiated in the early 1990s and carried with it the gradual opening up of the economy. This gradualist strategy seemed to have served the country well, in terms of aiding growth, avoiding crises and enhancing efficiency. The author also looks at India in the global context and challenges ahead especially for the banking sector.
 

3. Economy:

Andrew Filardo (February 2010); Monetary Policy Strategies in Asia and the Pacific: What Way Forward?

Monetary policy frameworks in Asia and the Pacific have performed well in the past decade as judged by inflation outcomes and the financial systems in the region also held up well in the face of the current crisis. It may nevertheless be useful to ask whether changes in monetary policy frameworks should be contemplated. Conclusions of this paper are that: (i) For economies with well developed financial markets, there may be little value in using unconventional monetary policies in the absence of crisis, (ii) A good case can be made for elevating the role of the misalignment of asset prices, and (iii) Financial stability should take on greater importance as an objective for public policy.

 

Rajesh Chakrabarti (February 2010); Financial Development in India – Status and Challenges

Financial markets in India have come a long way in the past decade. However, challenges remain, most markedly in the areas of institutional and business environment. In terms of the capital account convertibility regulation, this area has been marked with gradualism. Like many other emerging markets countries, Indian financial regulators labour under resource constraints. And also as the ongoing crisis has taught us, systemic risks and interconnectedness of markets are bringing about new regulatory priorities like watching over large financial conglomerates and macro-prudential regulator.

 

Sukudhew Singh (February 2010); Current Challenges for Emerging Markets in the Conduct of Monetary Policy in a Globalised Environment
  • Link to the article

The sustained period of low interest rates in the advanced economies and the divergence in interest rates relative to the emerging markets set off a chain reaction of developments that culminated in the current crisis. As we emerge from the crisis, policy makers in emerging markets are again being confronted by conditions that are creating risks to monetary and financial stability in these economies. Three of these policy issues are explored: (i) The implications for emerging markets of the easy monetary policy conditions in the advanced economies, (ii) The management of asset price bubbles, and (iii) Growing roles of commodities as an asset class for investors.


Peter Morgan (November 2009); ADBI Working Paper Series: The Role and Effectiveness of Unconventional Monetary Policy

Unconventional monetary policy measures encompass three broad categories: (i) Commitment effect, (ii) Quantitative easing, and (iii) Qualitative or credit easing. This paper reviews the range of unconventional monetary policy tools available to central bankers and summarizes their theoretical strengths and weaknesses. It also reviews available empirical studies of their effectiveness and issues related to exit strategies and other risks. The paper assesses the applicability of unconventional monetary policy measures to the current situation of Asian economies and other emerging markets.


Duvvuri Subbarao (October 2009); Emerging Market Concerns: An Indian Perspective

After indicating the unique features of the Indian economy, the author highlights five concerns for the Emerging Market Economies (particularly for that of India): (i) Exit from Accommodative Monetary Policy, (ii) Management of large and volatile capital flows, (iii) De-clogging monetary transmission mechanism, (iv) Fiscal stimulus – withdrawal and quality of adjustment, and (v) Financial stability, financial inclusion and growth.


Kawai and Pomerleano (October 2009); Containing a Systemic Crisis: Is There a Playbook

The paper argues that financial crises can be prevented. While one cannot prevent the precise timing of crises, one can avert them by identifying and dealing with sources of instability. For this purpose, policymakers need to strengthen top-down macro-prudential surveillance, complemented by bottom-up micro-prudential supervision. The paper explores such a strategy and the institutional setting required to implement it at the national, regional and global levels.  It also offers several proposals, such as the establishment of national and regional mechanisms for financial stability – to strengthen the global efforts – and the development of a cross-border insolvency regime.
 

Usha Thorat (October 2009); Learning from Crises

The key lessons to learn from crises are how to anticipate and take pre-emptive actions and once you are in the middle of it, how to respond effectively with regard to crisis management. Amongst other things, the speaker examines the BOP crisis of 1991, the securities irregularities of 1992, Asian Crisis of 1997, failure of a fairly significant mid-sized commercial bank in 2004 etc. The author believes that the key Institutional factors are to be encouraged and made part of the automatic trigger mechanisms in the system (e.g. committee approach, inter-regulatory co-ordination, consultative approach).


Duvvuri Subbarao (July 2009); Global Financial Crisis – Questioning the Questions

In this talk, the speaker tackles the questions that people are asking about the financial crisis, its impact and our approach to recovery. The global imbalances are examined as being one of the reasons for the onset of the financial crisis. In addition, the issues relating to the monetary and fiscal policy are being looked at.


V K Sharma (July 2009); The International Financial Crisis and India – the Impact, Response and Outlook

In this speech, V K Sharma looks into the effects of the international financial crisis on Indian economy. In addition, some recent fiscal and monetary policy measures and regulatory measures undertaken in India are examined.


Amadou N. R. Sy (October 2007); IMF Working Paper: Capital Account Convertibility and Risk Management in India

This paper takes a closer look at the prudential and regulatory measures needed to prepare India’s financial system to manage the risks arising from fuller capital account convertibility (FCAC). The paper contributes to the debate on FCAC in two ways. First, it reviews the potential and existing financial stability challenges to FCAC in India. Second it studies how prudential regulation and supervision is addressing these challenges. The main conclusion is that regulatory and supervisory measures alone are not enough and will need to be complemented by improvements in Indian banks’ risk management and further development of the domestic capital markets.