Banking sector after financial crisis
The Global Financial Crisis and the Indian Financial Sector
What Have We Learnt and How Have We Responded? 1
- Duvvuri Subbarao
_____________________________________________________________________________
Thank you very much for inviting me to speak at this conference of the Indian
Merchants’ Chamber on international finance and banking. I attach a lot of value to speaking from this platform and to sharing some thoughts on financial and banking sector reforms.
2.
In a few months from now, we will be marking the fifth anniversary of the collapse of
Lehman Brothers which will go down in popular perception as the trigger for the biggest financial crisis of our time. Five years on, the crisis is still with us - only the geography, the immediate concerns and pressure points have changed.
Our World View of the Crisis
3.
Even as the crisis is not yet over, it has changed our view of the financial sector in a
fundamental way. The world view before the crisis was that the growth of the financial sector, in and of itself, was desirable; indeed that real growth can be induced by sheer financial engineering. Our faith in the financial sector grew to such an extent that before the crisis, we believed that for every real sector problem, no matter how complex, there is a financial sector solution. The crisis changed that. We now know that for every real sector problem, no matter how complex, there is a financial sector solution, which is wrong. In the pre-crisis euphoria of financial alchemy, we forgot that the goal of all development effort is the growth of the real 1
Address by Dr. Duvvuri Subbarao, Governor, Reserve Bank of India at the 7th International Banking & Finance
Conference 2013 organized by the Indian Merchants’ Chamber at Mumbai on June 5, 2013.
economy, and that the financial sector is useful only to the extent it helps deliver stronger and more secure long
What Have We Learnt and How Have We Responded? 1
- Duvvuri Subbarao
_____________________________________________________________________________
Thank you very much for inviting me to speak at this conference of the Indian
Merchants’ Chamber on international finance and banking. I attach a lot of value to speaking from this platform and to sharing some thoughts on financial and banking sector reforms.
2.
In a few months from now, we will be marking the fifth anniversary of the collapse of
Lehman Brothers which will go down in popular perception as the trigger for the biggest financial crisis of our time. Five years on, the crisis is still with us - only the geography, the immediate concerns and pressure points have changed.
Our World View of the Crisis
3.
Even as the crisis is not yet over, it has changed our view of the financial sector in a
fundamental way. The world view before the crisis was that the growth of the financial sector, in and of itself, was desirable; indeed that real growth can be induced by sheer financial engineering. Our faith in the financial sector grew to such an extent that before the crisis, we believed that for every real sector problem, no matter how complex, there is a financial sector solution. The crisis changed that. We now know that for every real sector problem, no matter how complex, there is a financial sector solution, which is wrong. In the pre-crisis euphoria of financial alchemy, we forgot that the goal of all development effort is the growth of the real 1
Address by Dr. Duvvuri Subbarao, Governor, Reserve Bank of India at the 7th International Banking & Finance
Conference 2013 organized by the Indian Merchants’ Chamber at Mumbai on June 5, 2013.
economy, and that the financial sector is useful only to the extent it helps deliver stronger and more secure long