You are here:
- Asian Investment Conference 2012
- >AIC Reporter
- >2010
- >Day 3: March 24
- >India Finance Panel
India’s Financial System is Stress-Tested and Sound
A panel representing Indian regulators, banks and insurers told the Credit Suisse Asian Investment Conference today the country’s resilient financial system was in robust shape, but that there was a need to pursue further reform and develop product diversity.
India’s economic growth is regaining momentum after a slowdown imposed by the global financial crisis, and the nation’s financial system has been an island of stability through the turmoil of the last two years, investors heard this morning.
“The financial tsunami that hit the rest of the world completely bypassed us,” said Aditya Puri, Managing Director of HDFC Bank.
CB Bhave, Chairman of the Securities and Exchange Board of India, echoed comments made on Monday at the AIC by Kamal Nath, India’s Minister of Road Transport and Highways, about the critical nature of physical infrastructure to India’s development.
Mr. Bhave said investment in India’s financial infrastructure would also be vital to support the growth of its financial system. “India’s problem is whether we will be able to cope with the growth,” he said.
Mr. Bhave also reminded investors of the rapid growth of India’s capital markets in the last decade, and pointed out that foreign investors had rushed into the Indian stock market during the recovery of 2009 and 2010, investing US$22 billion after withdrawing some US$10 billion during the worst of the crisis in 2008 and 2009. He also discussed the wide-ranging liberalization of India’s capital markets in recent years.
“Ten years back, there were no equity derivatives in the Indian market,” he said. “Today, equity derivatives notch daily turnovers of between US$13 billion and US$20 billion.”
Interest rate futures and currency futures had also been introduced, added Mr. Bhave, who expressed confidence that the currency options would soon be added, and that the issuance of Indian Depository Receipts by foreign companies would also begin in the near future.
“We are hopeful that the first Indian Depository Receipts issue will happen this year,” he said. “If successful, we have no doubt in our mind that this market will expand considerably over the next five years.” Mr. Bhave also acknowledged the need to broaden India’s equity markets to include sectors that are currently absent, such as insurance and coal.
HDFC’s Mr. Puri said India’s banking system was “alive and kicking” but that there was an urgent need to develop the domestic bond market in order to intermediate more effectively between India’s high savings rate and substantial investment requirements. “Our problem is the debt market,” he commented. “You cannot have a debt market until you have a liquid and efficient government bond market and an arbitrage-free yield curve.” Mr. Puri called on the Indian government to diversify issuance away from the 10 year maturity and to facilitate greater participation in the bond market by long term investors.
Focusing on the insurance sector, V. Vaidyanathan, Managing Director and CEO of ICICI Prudential Life, said India’s financial sector had emerged strongly from the crisis. “India has been stress-tested over the last two years,” he noted, adding that he expected Indian insurance companies to become more profitable as penetration rates increased and to pursue listings.
Secondary Content
Day 3: Photo Album
