Financial Intermediation under Reforms in India: Evidences from Scheduled Commercial Banks

J Dennis Rajakumar

The IUP Journal of Bank Management, 2005, vol. IV, issue 1, 7-30

Abstract: The importance of a financial system in the development process of an economy has been extensively dealt within the paper. Since Scheduled Commercial Banks, in India, have nearly three-fourth of the total financial assets of all financial institutions, they have a cardinal role to play in the development process of the economy. This paper examines whether their intermediation has improved, subsequent to initiation of sector reforms since 1991. Evidence found by the paper suggests improvement in the intermediation process under reform, which supports the view that removal of control would improve the allocative efficiency of banks. Such an improvement has to be, however, appreciated against the observed backdrop of declining credit-deposit ratio; declining share of productive sectors like agriculture and industry, and manufacturing in particular, in total bank credit; and a corresponding increase in the share of personal loans and finance. The paper concludes by pointing out the need for further improvement in the intermediary role of banks in terms of financing productive sectors in the economy

Date: 2005
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