Financial markets in India have come a long way in the past decade and half in terms of economic reforms. India has emerged as a leader in Asia in terms of financial deepening. Development has been uneven in different parts of the financial sector, ranging from a virtual reinvention of equity trading to hardly noticeable in corporate debt markets. International portfolio flows have affected the financial sector in general with the effective level of capital account convertibility well above that reflected in the de jure restrictions, and changes here have been cautious. The regulatory structure is fragmented though with ongoing efforts at greater coordination and unification. Regulatory capacity, too, has fallen behind industry growth. The recent global crisis has underlined the importance of systemic risks, the interconnectedness of markets, the risks with large financial conglomerates and the need of macro-prudential monitoring. At the same time, the developments in UK have strengthened criticism of a unified regulatory structure and a shift to greater principle-based regulation. Some of India’s key developmental challenges lie in the areas of institutional and business environment, elements outside the direct control of financial policy makers.