... task is to keep the real interest rate that is the difference between the nominal rate of interest and the expected rate of inflation, at a realistic level, so that borrowers do not pay a high price, while depositors have an incentive to save. In India structural rigidities in the form of high intermediation costs and non-performing assets have been responsible for high real interest rates. It may be added that deregulation has not always been successful, witness the problems faced by a number of non-banking finance companies (NBFCs) and the poor performance of primary markets in recent years. Regulators The Government has accepted the important role of regulators. The Finance Ministry continues to formulate major policies relating to the financial sector. However, the Reserve Bank of India has become more independent, while the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority (IRDA) have become ...

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