The issue is basically one of informed risk management in terms of segregating more risky from less risky credits and finding appropriate ways of financing them. As we go along with reforms, we need to work harder to develop such institutions and systems. Venture capital has also a role to play.
Strengthening of the domestic financial system is a prerequisite for external sector opening up particularly in the capital account. Periodic assessment of financial sector gains importance in this respect. Such assessment includes appraisals of the relative importance of the various financial institutions in the system; the sensitivity of the system to shocks under alternative scenarios and financial soundness indicators.