In the years ahead, two big forces will define the environment in which Indian banks will be called upon to operate – a rapidly globalizing India and a fiercely competitive banking industry. This means in the main that Indian banks will have to upgrade their risk management architectures.
In this regard, an important lesson thrown up by the crisis is that in addition to managing more effectively the traditional risks such as credit risk, operational risk and market risk, banks also need to manage some new risks that have proven to be significant such as reputation risk, counterparty credit risk, liquidity risk, interest rate risk in the banking book and incremental risks in the trading book.