...Product innovation in banking is good because it helps in hedging risks and staying profitable. Shyamala Gopinath, former Deputy Governor, Reserve Bank of India, said banks need to be careful while innovating. “At the heart of the 2008 financial crisis was a $60 trillion outstanding in derivatives and the value of the underlying bonds were only $6 trillion. Such kind of risks should be avoided. That is why in India we have introduced only the plain vanilla credit default swaps (CDS),” Gopinath said. In this case, a credit protection can be given only if the seller has the underlying security......
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