Over-regulation is a big hurdle in the success of Indian financial sector, HDFC Chairman Deepak Parekh said.

Mr. Parekh acknowledged that there was a need to be vigilant, but also warned that regulatory "overbearance" of the financial sector of India had become a key risk. He expressed his views on the topic during his speech at the Motilal Oswal Investors' conference on Monday.

Parekh pointed out that financial companies in India have the additional challenge of having to take care of multiple regulators in the financial sector. He urged the financial regulators to interfere with the market forces and to allow them to work.

Speaking on the topic, he said, "While there is a need to be vigilant, it is also important for the regulators not to be too prescriptive and let market forces work."

He said it was not only banking sector which was struggling stringent regulations. He alleged that insurance and mutual funds were too facing operational difficulties due to stringent financial regulations.

Parekh also expressed his displeasure about the Reserve Bank's perception towards the NBFCs (non-banking financial companies). He said it appeared as it an attempt was being made to gradually curb NBFCs' activities by tightening up on their ability to raise resources.