Is State Ownership in the Indian Banking Sector Desirable?

Viral Acharya

India Policy Forum, 2012, vol. 8, issue 1, 1-35

Abstract: A large part of the Indian banking system is still state-owned, at the same time when there are several private banks as well as nonbank financial institutions. This article provides evidence that the state ownership—by implicitly conferring stronger guarantees on state-owned banks—distorts the level playing field between various banking sector players. It then relates this lack of level playing field to the role played by government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—in the recent housing boom and bust in the United States. It therefore proposes a graceful exit of the state from the Indian banking sector.

JEL-codes: D6 G01 G2 K23 (search for similar items in EconPapers)
Date: 2012
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