Imbalance in financial sectors can increase risk

Reserve Bank Governor Y V Reddy today said an imbalance in the growth of financial sector and real economic sectors such as agriculture and industries could lead to bubbles and possibly increase risk in the economy.

"Without the real sector development in terms of physical infrastructure and improvement in supply elasticities, the financial sector can even misallocate resources, potentially generate bubbles and possibly amplify the risks," Reddy said at a conference here.

While financial sector is the money-issuing part of the economy, the real sector, which comprises of agriculture, industries and non-financial services, is the money-holding segment that produces goods and services.

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