Speaking at The India Finance Forum (TIFF) here, Jalan listed out the inflexible rate structure as one of the problem areas which need to be addressed. "We need an interest rate structure which is more responsive to the short and medium-term requirements of the market," he said. On the need for a private debt market, the RBI governor observed that corporate sector activity was limited to private placements today and there was a need for a liquid system like a private bond market which supplements the equity market.

Giving out the Indian perspective on financing growth at the inaugural session of the two day TIFF conference, Jalan said the agenda for financial sector reforms for the next ten to 15 years was a long on and it could not be addressed unless different elements like the policy making apparatus and the private sector as well as government institutions get their act together.

Though financing growth per se was not a problem in the Indian context considering the healthy savings rate at 25 per cent of GDP, which provided enough room for mobilising resources, the financial system was beset with some problems, he observed.

On the regulatory front, while the RBI itself was attempting to move towards international standards of prudence, capitalisation, accounting practices and transparency, the question is how to bring about a responsive structure.

While the central bank is moving towards new instruments of control, there is need to make the whole system self-regulatory. He said that private sector participation was essential for a vibrant financial system, but there was a need for improving its reputation in areas like non-collateralised deposit taking.

Earlier, delivering a special address, M Narasimham, chairman, Administrative Staff College of India (ASCI), said second generation financial sector reforms had to be set against the broader macroeconomic changes. An important aspect of this is that we are now on a higher growth trajectory which will call for a continuing and expanding role for the financial system in mobilising savings in an effective and efficient manner.

Meanwhile, the greater integration between the money, securities and foreign exchange markets has meant greater exposure to market risks for the financial and banking sector, Narasimham felt. This calls for a greater measure of risk management and the development of newer forms of risk management techniques, he said.

At the same time the corporate sector is in the process of restructuring itself in the country and financial institutions would be expected to adapt their functioning to these changes and, in fact, involve themselves in this exercise, he stressed. Two areas which call for some innovative changes are with respect to financing of infrastructure and of techno-preneurs in the knowledge-based sectors, said Narasimham, who is also a member of the Prime minister's Economic Advisory Council.

The opening up of the insurance sector and some liberalisation of rules governing investment by provident funds would have a positive effect on the availability of finance for infrastructure, he said, emphasising that the appraisal of such projects would require different skills and innovative financial engineering. The two-day conference is being attended by nearly 300 CEOs, CFOs, economists and representatives of leading term lending institutions.