Institutional EYE

Commentary on Corporate Governance Issues

Banks in India: Too few to fail

Recapitalizing banks alone will not ensure that sufficient credit flows to revive and sustain economic growth. India urgently needs more banks. Schumpeter saw credit creation and its contraction as being at the heart of capitalism. In India credit growth has remained anaemic even as we have maintained social distancing from market-linked reforms. BIS data shows that India’s credit to the non-financial sector as a percentage of its GDP has consistently lagged but that it now seems to be stuck in a rut. Consequently, growth too has remained anaemic. To get growth back we need to revive the animal spirts that fuelled the economy in the early years of this millennium and to move money from those

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