Banking Reform in India

This paper explores reform in the banking sector of India. Government ownership of banking was originally justified by arguing that the public sector would be better at distributing the benefits of a line of credit to the entire population, and could ensure banks served the interests of the state. Advocates of state ownership claimed this would make society more equitable and fair. Modern analysis, however, finds under-lending a problem in India. This paper explores the ramifications of such a finding, and compares the performance of public and private banks in India. Suggestions are made for further reforms in the banking sector.