A “Vaccine” For Banks

Nobel laureate Abhijit Banerjee’s suggestion that foreign investment be allowed in the beleaguered banking sector is just the help it needs. It will boost the economy and lead to efficient use of resources

- Shivanand Pandit

NOBEL prize winner Abhi jit Banerjee has stated that India must permit foreign investment in the banking sector and that confining capital infusion in this segment to Indian industrialists is a blunder. He said that nobody other than foreign financiers would have the fund strength to write down the debt of the Indian banking structure.

Banerjee said it was erroneous to consider that Indian capitalists were better than overseas ones. He said that the books of accounts of Indian banks reveal their unhealthy condition, with the sector in the red. He said that numerous payment evasions by Indian entrepreneurs led to huge liability and the banks were in a mess.

For the economic progression of any nation, a robust banking sector is important. The power of financial institutes is a chief parameter for adjudicating economic evolution in the world.

“The Indian banking sector is half-dead and capital-starved. It has no money to lend money and capital can come easily from foreign businessmen in the banking sector. We are afraid of competition, but faced with it, we come out good,” the Nobel laureate said. He said that a massive part of government fiscal effort, declared as a response to the pandemic, was to bail out borrowers, and banks would have to be recapitalised to lift development, as at present, credit was very expensive in India. He also mentioned that the variance between lending rate and borrowing one was very high.