One of the main reasons why India escaped the adverse impact of the crisis was a calibrated approach to financial innovation. However, we as regulators and supervisors need to guard against stifling financial innovation while at the same time remain cautious about the objective and purpose behind the new and complex financial products that are proposed or introduced by the industry.
This is particularly relevant for a country like India as its resilience in the face of heavy financial turbulence can be quite limited and as no social safety nets are available. These concerns shape RBI’s approach to financial innovation.