Mumbai: Bankers today lauded India''s financial sector regulations but said inspection systems need to improve to make them more effective.
They also suggested low-cost delivery models and guarded against choking innovation so as to meet the country''s objectives of financial inclusion.
Regulations governing the financial sector are strong in India but there is a need to improve the inspection systems to make them effective, private sector lender Yes Bank chief executive and Managing Director Rana Kapoor said.
"You can have great regulation, great compliance but unless you have knowledgeable skill-sets driven inspectors who understand the nuances of a bank's architecture, they do not work," Kapoor said at a session on financial innovation at the CII-WEF-organised India Economic Summit here today.
When asked if the inspectors lack the requisite skills, he answered in the affirmative.
Kapoor said, meanwhile, that the Reserve Bank's foresighted approach like having counter-cyclical buffers helped the system handle risks from micro finance, capital markets and real estate.
On micro finance institutions and the need for financial inclusion, bankers said that technology-enabled, low-cost delivery models are required to get a large part of the population under formal finance's gambit.
SBI Managing Director and group executive for international banking Hemant Contractor said courtesy the business correspondents model, banks will now be able to cater to the credit needs of those who are served by MFIs, which have been under attack for charging exorbitant interest rates and the loan recovery methods.
He said the country's largest lender does not have any plans for fund raising from the foreign markets at present due to the weak macroeconomic sentiment globally.
About the impact of the euro-zone crisis on the bank, Contractor said it has minimal exposure to Greece and Italy which is largely short-term trade finance in nature.
SBI does not hold sovereign bonds of any of the troubled nations in the euro currency area, he said, adding that it holds some bonds issued by the much stable Hungary.
On the 2008 financial crisis, bankers said it is wrong to blame financial innovation for the global meltdown, saying that it came about due to the lack of transparency.
"What happened in 2008 is the lack of transparency and faulty regulations around those products, which allowed an over concentration of risk. And it was more the lack of transparency than the innovation itself," said Rich Ricci, co-chief executive of Barclays Capital, UK.
Source: PTI
