Post Crisis Strategies in India: A possible way for financial Supervision & Regulation

Abstract

After the globalization of the world economy, no country could insulate itself from any undesired economic activities taking place in rest of the world. As we know that the economy tends to move in various phases i.e., from expansion to peak and then peak to recession and along the way of "Phase to recovery" and once again to peak. The financial crisis resulted from greed during expansion as the cause and sufferings during recession as the result. During the last few years, there has been drastic change in world economic scenario. The policy makers and supervisors are trying to grapple with the havoc the crisis has wreaked. New regulations have replaced old ones and new theories have come to the forefront debunking the old and crisis-battered beliefs. But one question still remains.  Have we really come out of the crisis and entered the post-crisis world? Is the crisis now a thing of the past and is it firmly behind us?  It does not appear to be so. If one looks at the latest IMF update on World Economic Outlook , the growth rates have been revised downwards, though marginally, to 3.5% for 2013 and 4.1% for 2014 and it specifically notes that the Euro area continues to pose a large downside risk to the world economy. The paper focuses on the genesis of the global meltdown, lessons learnt, review of regulatory framework India in particular and the current debate what to do. The focus of this paper is on financial regulation may be understood as a cluster of interrelated policies designed to ensure the proper functioning and integrity of financial systems. The scope of paper includes regulation and supervision of policy, investment flow management, risk management, accounting overhaul, protection of investors etc. Other reform areas such as capital-flow controls, prevention of money laundering, incentives, bank capital and the taxation of financial activities can overlap with this agenda, but are not considered here part of it in a strict sense.