| dc.description.abstract | Though the Indian financial sector had very
limited exposure to the toxic assets at the
heart of the global financial crisis, it suffered
a severe liquidity crisis after the Lehman
bankruptcy. This liquidity crisis could have
been averted with timely injection of liquidity
into the system by the Reserve Bank of
India, claims Jayanth Varma. Apart from the
liquidity crisis, India also had to deal with
the collapse of global trade finance; deflation
of an asset market bubble; demand contraction
for exports; and corporate losses on
currency derivatives. Looking ahead, the
paper argues that the crisis is a wake-up call
for the Indian banks and financial system for
better managing their liquidity and credit
risks, re-examining the international expansion
policies of banks, and reviewing risk
management models and stress test methodologies. | |
