What will promote the stability in the financial system?

To my knowledge, the Financial institutions need a further restructuring to ensure their ability to lend and support economic recovery. Deeper financial reform and the resolution of weak banks will be needed if an exit from liquidity and funding provision during the crisis is required. Therefore i suggest if there is recapitalisation in the financial institutions, it would promote a further stability in the financial system.

We need to be sure that the government has the tools it needs to manage crises, if and when they arise, so that we are not left with untenable choices between bailouts and financial collapse. Atleast, we should be ready with a new regime to resolve non-bank financial institutions whose failure could serious systemic effects.

In my opinion, when there is a financial crisis happening outside India, the investors withdraws from the markets in fear, which affects the stability in the financial system. To rebuild trust in our markets, there should be a strong and consistent regulation and supervision of consumer financial services and investment markets. As such, there can be a new Consumer Financial Protection Agency to promote transparency, simplicity, fairness, accountability, and access for the investors.

The main reason for slow recovery is becasue projects that gets delay in 2008 still din't get full clearnace from the govt. Govt. needs to speed up the process to clear the projects so that credit off take wil increase and makes recovery fast.

Another reason that makes credit off take very slow or mererly 10% as compare to normal 25-30% is because in the past majority of project cost were finance through debt and capital consists of only 20% of total project cost however after 2008, in last one year lot of companies have raised fund thorough IPO's and at present circumstances 50% of project cost consist of capital.

Financial system in India is regulated by Reserve Bank of India, for this we have Reserve Bank of India Act 1934 and Banking Regulation Act 1949, both these Acts for the regulation of banking activities. It will have close observation of bankig activity, economic indicators and supervise balanced groth by varying the various controle measures. This central bank is functioning only for bringing stability, it is not meant for profit.

Banking system is the foundation for the whole economy and the financial market. When interest rate is more capital will be attracted, which is vital for development, if we exploit the capital in line with productivity or if at better productivity level, the economy improves.

I feel one's stability is more balanced when its not dependent more on others. If the foreign holdings are more than the domestic than the chances of instability rises gradually. Then the domestic movements become pupets in the hands of foreign holdings. So i feel we should try to minimize foreign stakes in local companies and make more ways such that the local investors feel more comfort investing locally. Also i dont deny that foreign investors play a vital role in domestic growth, however this view is only to the extent of maintaining the domestic financial stability. .... Thank you, Manish N.

Cheers!!

I will start from a black marketeer; criminal; hawala operator; borrower; salaried person and end with an entrepreneur.

This may look ridiculous - starting a solution from a black marketeer and continuing with a criminal/hawalaia operator....

A black marketeer wants to save tax- so reduce taxes and make it convenient

A criminal wants to earn quick money and he invariably has a need for money.  It may be comforts or a genuine need.  The social cost of converting a criminal into a human being is much costlier than providing some facility to him.  If we go deeper into the problem, we will be able to convince him to come out of crime.

A hawala operator is one who benefits from a need to transfer funds.  After all transfer of funds is a simple financial activity.  as long as cost of transfer of funds is higher and difficult, hawala operators survive.  The financial system should be realistic.

A borrower has a genuine need.  Credit should be available.  It should be made available.   However, the activity should sustain cost of funds.  With this criteria, credit should be made available.

A salaried person does not have differential income.  Our tax structure should encompass a fixed income person and a differential income person.

The basic need for an entrepreneur is to implement his project idea.  He should b able to do so.  Our financial system should allow that.  

I may have missed some persons.  However, if we address the above, our financial system will be stable and in the growth path.

Why not leave the issue to the market itself ? " Ah market hai ... Bhai ... market .. !! "  Every market has its ups and downs. When 'we' made superficial profits in Sub-prime or Hybrid Mortgages, did we ask for guidences from the Authority or the Regulators ?

 When  ever there is a problem .. we expect Govt to come forward to rescue .. !! Do you mean "stability " or "upward trend" ? The saying goes, what may go up may go down also. Essence : if 'we' want stability that should be supported by market (players) itself. BUT players hunt for only one thing : Profit. May Dalal Street go up when other streets are at distress ? When the society at large is suffering, may the market be stable ?

Wealth of a Nation must grow for Financial stability to take place. Credit oftake is important for wealth to materialise, for this the interest rates has to be low for borrowers to make wealth possible on borrowed funds.

During high interest costs wealth distruction occurs, that is when the budget is in high deficit, the interest costs of borrowing rise, the value of currency degenerate and wealth distruction occurs. It will be difficult for businesses to make profits at this juncture.

During high deficits, inflation too pick up and distroys the wealth of a Nation. So; inflation need be checked for financial stability to happen. Alao, the Living standards of the citizen must rise and be maintained.