Financial crisis not related to bad loans ?

Following Straits Times extracts on interview with Mr Dhanabalan
He mentioned the global financial tsunami came about because of a bubble formed from bets on how events in the economy would pan out, not because bankers made inappropriate loans.
Mr Dhanabalan praised the book's author, Dr Y. V. Reddy, a former governor of the Reserve Bank of India, for laying a foundation that helped India emerge more resilient in the wake of the crisis.
He said of Dr Reddy: 'He refused to be seduced by the much-celebrated financial innovation culture of the central banks and their regulators in the West.'
Dr Reddy has earned widespread kudos for effectively managing India's calibrated financial integration with the global economy during his time as governor of India's central bank from 2003 to 2008.
Added Mr Dhanabalan, 'While banks in the United States over-indulged in financial instruments and wholesale banking, Indian banks were encouraged to concentrate on more fundamental banking functions such as mobilising deposits and disbursing credit.'   [ I think similarly as in Muslim Banking, they seem also not greatly impacted by the crisis. I will try to find more reasons why Muslim Banks are not affected ]
India's banks avoid extensive exposure to toxic assets, and protected the country's banking system from a crisis of liquidity, he added.
Titled India And The Global Financial Crisis: Managing Money And Finance, the book is a collection of essays offering insights into the formation of the country's public policy from 2003 to 2008 - a period of rapid growth for the Indian economy and extraordinary challenges for the conduct of monetary policy.
There has been keen interest in the way that India managed its financial sector during this period, which allowed it to facilitate growth while maintaining stability after the onset of the financial crisis.
The book discusses these issues, giving a comprehensive account of the events that led to the crisis, the policy responses and directions for reform. It also examines the Indian approach to overcoming contagion effects from the recent turmoil.  To follow up on this topic with more info search....... stay on.