New solutions to India's banking crisis

By increasing the pace of bank licensing and inducing competition in the sector, the RBI can begin the process of much-needed reform while avoiding political interference

The Indian government’s relatively swift decision to implement a bank recapitalisation plan in October 2017 was a first step in the right direction. However, the discovery in February 2018 that one of India’s public-sector banks had been defrauded of $1.8 billion over the course of seven years confirmed what we all suspected and feared. The problems in India’s banking sector go much deeper than recapitalisation alone will be able to solve.

Unfortunately, most of the recent reform efforts have focused too much on the symptoms of India’s banking crises, rather than the underlying structural and operational weaknesses in the sector.