"It is now being argued that too much of finance is also not conducive to growth. While at lower levels, a larger financial system leads to higher productivity, beyond a point, more banking and more credit result in lower growth," a paper brought out by industry body Assocham said.
Though the government is placing lot of emphasis on financial inclusion, the study cautioned there is a lesson for India.
"...too much of leverage (borrowing), too much of liquidity (cash), too much of complexity and too much of greed - they all have led to the European crisis".
It is also argued in the study, 'European Sovereign Debt Crisis- Weapon of Mass Destruction - Impact on India' that fast growing financial sector can be detrimental to the aggregate productivity growth.
Moderation in approach, therefore, is important, it said citing reference from several international papers.
"In the period before crisis, the financial activity grew so much that the umbilical cord between financial and real sectors were severed and finance started to exist for its own sake. The dangers of such a scenario have been quite emphatically conveyed by the crisis".
The study said it was interesting to compare the western and Indian economies in the context of social security.
"Too much of social security in the western nation made them shun savings and encouraged to live beyond their means."
They consequently ran into falling investments and slowing government revenues and the good days could not continue seamlessly, said Assocham Secretary General DS Rawat.
Though developed nations had good intentions...somewhere they lost track to find them in a trap of high debt and falling growth curve, said the paper.
India does not have system for such social security, it said.
While India has a strength of high savings, its own problems of high fiscal deficit, elevated inflation, currency under pressure, cost of lending, falling pace of growth have all contributed to economic slowdown.
In India, "high borrowings by the government and cost of funds could be a matter of concern. All efforts of the policy makers are targeted towards soothing the markets and eschew volatility and falling confidence graph" it said.