of fixed - income securities, which are predominantly used for market making, declined sharply after the lehman brothers failure, from about $ 1. 3 trillion to about $ 800 billion, and have since fallen further to about $ 700 billion. the recent decline might be due in part to regulations, such as the volcker rule and the supplementary leverage ratio, aimed at making the financial system safer and sounder, as well as to changes firms may have made on their own, perhaps in reaction to the experience of the financial crisis. regardless of the causes of the change, market participants have expressed a concern that the decline in inventories reflects in part a reduced willingness or capacity of the primary dealers to make markets - - which may in turn lead to lower liquidity. however, whether markets are in fact less liquid depends on both the degree to which the decrease in primary dealers ’ inventories affects their willingness to provide liquidity and the extent to which nonbank firms such as hedge funds and insurance companies fill any lost marketmaking capacity. 4 2. decline in trade size and turnover market participants also often cite the decline in average trade size and turnover - - the volume of trades relative to the total amount of bonds outstanding - - as bessembinder, jacobsen, maxwell, and venkataraman ( 2016 ) find that bank dealers are less willing to provide liquidity now than in the recent past, while nonbank dealers are more willing. duffie ( 2012 ) argues that the negative effect the volcker rule may have on market liquidity in the short run may disappear in the long run as nonbanks step in to provide liquidity. duffie ( 2012 ) also mentions that the migration of liquidity provision from banks to nonbanks, which are not regulated, may have potentially important adverse consequences for financial stability. - 3evidence of reduced liquidity. figure 2 shows that average trade size in the corporate bond market has indeed declined since 2006 but has been relatively stable in the past four years. nevertheless, this decrease may reflect a number of factors, including changes in technology or the types and preferences of institutions engaged in trades, so it may not indicate a reduction in market liquidity. certainly, the length of this trend, roughly a decade, seems on its face more consistent with a secular trend such as technological change. turnover in the corporate bond market has declined as well, though this evidence is also not a definitive sign of reduced market liquidity. the decline in turnover is not

18. 2 23. 0 indonesia 13. 2 17. 3 south korea 29. 0 28. 0 malaysia 24. 1 32. 2 mexico 26. 5 26. 9 thailand 10. 3 19. 0 turkey 34. 9 24. 5 source : kalpana kochhar, utsav kumar, raghuram ioannis tokatlidis ( 2006 ),'india's pattern of what follows? ', journal of monetary economics, vol. 53. rajan, arvind development : subramanian and what happened, growth in bank credit the upturn in economic activity is mirrored in the sustained growth in demand for bank credit. bank credit has increased sharply from 30 per cent of gdp at end - march 2000 to 48 per cent by end - march 2006 ( chart 5 ). non - food credit extended by scheduled commercial banks ( scbs ) recorded an average annual growth of 26. 1 per cent between 2002 - 03 and 2005 - 06, notably higher than that of 14. 5 per cent recorded during the preceding four - year period ( 1998 - 99 to 2001 - 02 ) as well as the longrun average of 17. 8 per cent ( 1970 - 2006 ). the stagnation in credit flow observed during the late 1990s, in retrospect, was partly caused by reduction in demand on account of increase in real interest rates, turn down in the business cycle, and the significant business restructuring that occurred during that period. apart from the revival of economic activity, the sharp growth in bank credit in the recent years can be attributed to factors such as financial deepening from a low base, structural shifts in supply elasticities, rising efficiency of credit markets and policy initiatives to improve flow of credit to sectors like the agriculture and small scale units. increasingly, retail credit led by demand for housing as well as other retail loans is emerging as a major driver of growth in bank credit. this is reflected in the sharp increase in the share of housing credit in overall credit extended by scbs from 2. 4 per cent at end - march 1990 to 11. 0 per cent at end - march 2005. growth in retail credit has also emanated from increased use of credit cards, loans for consumer durables and demand for education loans. the share of non - housing retail credit in total bank credit has increased from four per cent at end - march 1990 to around 11 per cent at end - march 2005. thus, the share of total retail credit in bank credit has