Apart from the general concern in this regard, in India there is an additional concern about the variable used to calibrate the countercyclical capital buffer. Credit to GDP ratio is put forward as a natural candidate for this calibration. It is not clear that this will be an appropriate indicator in the Indian context.
Unlike in advanced economies where this ratio is stable, in emerging economies such as India, it will likely go up for structural reasons – enhanced credit intermediation owing to higher growth as well as efforts at deepening financial inclusion. However, the proposed framework is flexible enough to allow national discretion to suit the country situation in a “comply or explain” framework.