- Regulations can mitigate risks by strengthening supervisory mechanisms.
- This is especially important for large conglomerates.
- RBI needs a robust legal framework to deal with inter-connected lending.
- However, the text notes that RBI can often only react ex-post.
- Tracing funds through complex corporate structures is a challenge.
- Cooperation from various law enforcement agencies would be required.
- Any action by RBI could still cause a flight of deposits.