Banks in India: Too few to fail

Forget the health of the banks, what should be worrying the regulators is just the number of banks through which such financial intermediation can take place

Joseph 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 gross domestic product (GDP) has consistently lagged, but now it seems to be stuck in a rut. Consequently, growth too has remained anaemic.

To get growth back, India needs to revive the animal spirits that fuelled the economy in the early years of this millennium and to move money from those who don’t need