The post-crisis perspective on financial sector development emphasizes strongly capitalized banks along with restrictions on deployment of funds, with a view to maintaining robust balance sheets. In India as well as in many EMEs, a more conventional or traditional approach to banking, with its emphasis on lending as opposed to investment, appears to have been a source of resilience.
At the same time, too much conservatism may reduce the ability of the financial system to meet the evolving financial requirements of a rapidly growing economy. In this context, a strategy for financial development needs to continually balance the ability to introduce new ways of financing new opportunities with the means to measure and mitigate the risks that these opportunities bring.