There could also be the issue of negative externality of larger than warranted capital requirements without careful calibration which could adversely impact the flow of credit to productive sectors, particularly in bank funding based financial systems. Emerging economies are faced with the challenge of managing volatile capital flows which is not a source of systemic vulnerability for developed economies.
The financial system in India is admittedly not as advanced as in many other countries. Many of the issues I have touched upon in my remarks are based primarily on a secondary assessment and understanding of the experience of global markets.