Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Indian Financial Sector Self Assessment Report

Updated: Ajay Shah corrects me and points out that this is not a true FSAP but an imitation of the real thing. Even less reason to take it seriously. Incidentally, I think that the real FSAP itself is a waste of time if not worse. But that is beside the point.

The Indian financial press is today full of stories based on the Financial
Sector Self Assessment Report
prepared jointly by the Reserve Bank
of India and the Ministry of Finance.

I think the coverage given to this self assessment report is quite
disproportionate to its true significance because the report is
prepared as part of the country’s participation in the Financial
Sector Assessment Programme (FSAP) conducted by the IMF and the World
Bank.

As anybody who has prepared or evaluated a self assessment report
knows, it is critically important for such a report to demonstrate (a)
an awareness of major weaknesses and (b) some thinking about possible
measures to overcome them. If these are present in the self
assessment, the external evaluator can and often does condone all the
weaknesses!

By these standards, the self assessment report does an admirable
job. But by the same token, it is silly to think that the report
reflects the thinking of the RBI or the government on any of these
matters.

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