Bank Financing in India

  • Abhijit Banerjee
  • Shawn Cole
  • Esther Duflo
Part of the Procyclicality of Financial Systems in Asia book series (IMF)


The Indian banking sector has been remarkably successful in some respects. Its immense size and enormous penetration in rural areas are exemplary among developing countries, as is its solid reputation for stability among depositors. The penetration in rural areas has been associated with a reduction of poverty and a diversification out of agriculture.2 However, in recent years, it has been widely viewed as being both expensive and inept. In particular, it has been argued that most banks are overstaffed, that a large fraction of their assets are nonperforming, and that they under lend, in the sense of not putting enough effort into their primary task of financing industry.3 A wide range of remedies have been suggested ranging from strengthening the legal system to punish defaulters, to abolishing the targeted lending programs (so-called priority sector rules), to privatization of the entire banking system.


Interest Rate Bank Credit Credit Constraint Priority Sector Bank Financing 
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Copyright information

© International Monetary Fund 2005

Authors and Affiliations

  • Abhijit Banerjee
  • Shawn Cole
  • Esther Duflo

There are no affiliations available

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