In India, the complementary policies considered essential have been identified by the Committee of Capital Account Convertibility (1997). The Committee observed that while there were benefits of a more open capital account, it could also impose pressures on the financial system.
I’ve highlighted the risks associated with the household sector, but low-for-long interest rates can lead to risks elsewhere in the financial system. Periods of low interest rates may, in some circumstances, trigger a “search for yield” driving excessive risk-taking – often through investment strategies whose risks are not well understood.