Financial Development, Bank Ownership, and Growth. Or, Does Quantity Imply Quality?

This paper extracts conclusions about the banking sector after examining India's process of bank nationalization in 1980. Following nationalization, different bank ownership structures existed from town to town. This enabled academics to credibly measure the effects of bank ownership on financial development, lending rates, the quality of intermediation, employment, and investment. The author concludes that credit markets with nationalized banks had faster credit growth following a financial repression. The mass nationalization on banks also resulted in lower interest rates and quality of remediation, and may have slowed employment gains.