Indian banking should evolve to meet the needs of diverse segments of its growing economy and not merely imitate the boutiques of high street finance, writes Bandi Ram Prasad
Reforms being a lengthy process, it is natural to have continuous assessment and evaluation of trends and developments. This article discusses some critical aspects of Indian banking, in the background of the international data provided by a recent study by the economists at the World Bank.
The study examined the relationship between financial sector development and economic growth on a sample of 150 countries and assessed the efficiency of the financial systems on the basis of the relative strengths of banking and stock markets. An important value addition of this study is comparing the characteristics of the bank-based (ratios of banking sector are higher relative to stock market development) and market-based (ratios of stock market development are higher) financial systems.
A financial structure index whose higher values reflect a higher degree of stock market development relative to the development of the banking system is computed based on which countries are classified into four; financially underdeveloped and bank