RBI Issues Report On Banking In India
In India, complex structured products, such as, synthetic securitization, have not been permitted so far. Introduction of such products, when found appropriate, would be guided by the risk management capabilities of the system. Exposures of banks to synthetic security derivatives are the main cause of the global financial crisis
The report said that the major problems which financial institutions have faced internationally are illiquid assets, capital shortages and collapse of counter-party trust. In India, however, the situation is different. The central bank has been vigilant about the lessons that have emerged from the crisis.
The crisis suggests that risk management and supervisory practices lagged behind financial innovations and emerging business models. The report notes that RBI has already put in place a system to mitigate liquidity risks at the very short-end, risks at the systemic level and at the institution level.
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