India needs to connect with its regulators

Regulation is an essential aspect of a well-functioning economy. It helps to protect consumers, ensure fair competition, and promote stability in the financial system. However, in recent years, there have been instances in India where the lack of proper regulation has led to significant problems for consumers, businesses, and the economy as a whole. In this article, we will discuss why India needs to dial up its regulators and provide a recent example of a scenario where the lack of regulation has caused significant problems.

One of the most recent examples of the need for stronger regulation in India is the crisis in the non-banking financial companies (NBFC) sector. The NBFC sector, which includes companies like Housing Development Finance Corporation (HDFC) and Dewan Housing Finance Corporation (DHFL), has been hit hard by the ongoing credit crunch. Many NBFCs have been struggling to raise funds, and as a result, have been unable to meet their financial obligations. This has led to a severe liquidity crunch in the sector, and many NBFCs have had to default on their loans.

The crisis in the NBFC sector has had a ripple effect on the economy, with many businesses and individuals being impacted. For example, many small and medium-sized enterprises (SMEs) rely on NBFCs for funding, and the crisis has made it more difficult for them to access credit. Additionally, many households who have invested in NBFCs have seen the value of their investments decline significantly.

The crisis in the NBFC sector highlights the need for stronger regulation in India. In the absence of proper regulation, NBFCs were able to take on excessive risk and grow rapidly without sufficient oversight. As a result, when the economy slowed down, many of these companies were unable to meet their financial obligations, leading to a severe liquidity crunch.

To prevent similar crises in the future, India needs to dial up its regulators. The government and the central bank need to ensure that there are proper guidelines and regulations in place to oversee the NBFC sector. Additionally, there should be more stringent rules in place to ensure that NBFCs are not taking on excessive risk and that they have sufficient liquidity to meet their financial obligations.

In conclusion, regulation is an essential aspect of a well-functioning economy. The recent crisis in the NBFC sector in India highlights the need for stronger regulation. The government and the central bank need to ensure that there are proper guidelines and regulations in place to oversee the NBFC sector. Additionally, there should be more stringent rules in place to ensure that NBFCs are not taking on excessive risk and that they have sufficient liquidity to meet their financial obligations. By dialing up its regulators, India can help prevent similar crises in the future and promote stability in the financial system.