New Delhi, March 8 (IANS) The Indian government must encourage financial innovation and make the debt market efficient in order to boost investments and growth, chairman of the Prime Minister's economic advisory council C. Rangarajan said Friday.
"An efficient debt market will help not only large industries but also small and medium enterprises. Market makers through two-way quotes will provide the required liquidity to the market and make it attractive to investors," Rangarajan said at ICC Asia Pacific CEO Forum, organised by the International Chamber of Commerce (ICC) India here.
He said a "vibrant debt market" will take care of investors' need for long term funding.
Underlining the need for financial innovations, Rangarajan said there should be a balance in regulations to promote innovation.
"Too little regulation may encourage financial instability but too much of it can impede financial innovations which are badly needed. The rigour of regulation must be uniform among all segments to avoid regulatory arbitrage," he said.
Rangarajan, a former governor of the Reserve Bank of India (RBI), said excessive leverage in banks could be contained through additional supplements to the risk-based capital ratio.
"It is imperative to separate conventional deposit-based banking from investment banking and creating appropriate firewalls," he said.
More than 100 chief executives from 16 countries participated in the two-day forum organised by ICC India.
"The forum has provided a very timely occasion for ensuring that the concerns and challenges facing businesses - large and small in this region, including rebuilding the region's financial architecture and generating sustainable growth for Indian businesses are clearly positioned for consideration of all governments," said ICC president Harshpati Singhania.
The forum featured discussion on topical subjects including the emerging financial architecture in the Asia Pacific region, new ideas and approaches to sustainable growth, as well as emerging business opportunities and challenges.
It also included a G20 policy consultation that will help shape ICC's policy recommendations for G20 leaders.
"Business leaders at the forum received a first-hand assessment of the evolving business opportunities in one of the fastest growing regions of the world," Singhania said.