• Research
  • Diwan
  • About
  • Experts
Carnegie Middle East logoCarnegie lettermark logo
LebanonIran
{
  "authors": [
    "Suyash Rai"
  ],
  "type": "other",
  "centerAffiliationAll": "",
  "centers": [
    "Carnegie Endowment for International Peace",
    "Carnegie India"
  ],
  "collections": [],
  "englishNewsletterAll": "",
  "nonEnglishNewsletterAll": "",
  "primaryCenter": "Carnegie India",
  "programAffiliation": "",
  "programs": [],
  "projects": [
    "Political Economy"
  ],
  "regions": [
    "India"
  ],
  "topics": [
    "Domestic Politics",
    "Economy"
  ]
}

Source: Getty

Other
Carnegie India

Regulation in India: Banking

The financial system plays an important role in mobilizing savings, allocating capital in the economy, monitoring corporations, providing liquidity, helping individuals and firms manage risks, facilitating payments, and other economic functions.

Link Copied
By Suyash Rai
Published on Apr 4, 2019
Project hero Image

Project

Political Economy

This program studies contemporary developments in India’s political economy, with a view towards understanding and informing India’s developmental choices. Scholars in the program analyze economic and regulatory policies, design and working of public institutions, interfaces between politics and the economy, and performance of key sectors of the economy such as finance and land.

Learn More

Source: Hart Publishing

Banking is not only basically 19th-century technology, but it is disaster-prone technology.1
—Merton Miller

The financial system plays an important role in mobilising savings, allocating capital in the economy, monitoring corporations, providing liquidity, helping individuals and firms manage risks, facilitating payments and other economic functions. There is significant evidence of the positive impact of financial development on the economy.2 Financial systems of different countries differ in terms of their institutional structure, with some being largely market-based and others more bank-based.3

India’s financial system is largely bank-based. As of 31 March 2016, about 45.5 per cent of borrowing of non-financial firms was from banks (see Figure 6.1). For private non-financial firms, the share of bank loans was 51.6 per cent, while bonds and foreign borrowing added up to less than a quarter of borrowing. As of 31 March 2016, the ratio of scheduled commercial banks’ deposits to gross domestic product (GDP) was 67.8 per cent, up from 41.4 per cent at 31 March 1996. The total deposits with banks were Rs 103.6 trillion, while the total assets under management with mutual funds and the pension system were only Rs 13.5 trillion. Given the salience of banks in the economy, regulation of banking is a crucial function of the Indian state.

Read Full Text

This book chapter was originally published by Hart Publishing.

NOTES

1 Merton Miller, ‘Financial Markets and Economic Growth’ (2003)11(3) Journal of Applied Corporate Finance 8, 15.

2 See generally Raghuram G Rajan and Luigi Zingales, ‘Financial Dependence and Growth’ (1998)88(3) American Economic Review 559, 586.

3 Asli Demirgüç-Kunt and Ross Levine, ‘Bank-Based and Market-Based Financial Systems: Cross-country Comparisons’, World Bank, 1999, available at http://documents.worldbank.org/curated/en/259341468739463577/pdf/multi-page.pdf.

About the Author

Suyash Rai

Former Fellow, Carnegie India

Suyash Rai was a fellow at Carnegie India. His research focuses on the political economy of economic reforms, and the performance of public institutions in India.

    Recent Work

  • Article
    The Best of Ideas and Institutions, 2023

      Suyash Rai, Anirudh Burman

  • Other
    Global Technology Summit 2022 Action Points
      • +4

      Shruti Sharma, Suyash Rai, Konark Bhandari, …

Suyash Rai
Former Fellow, Carnegie India
Suyash Rai
Domestic PoliticsEconomyIndia

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

More Work from Malcolm H. Kerr Carnegie Middle East Center

  • Commentary
    Diwan
    Unpacking Lebanon’s Gap Law

    In an interview, Ishac Diwan looks at the merits and flaws in the draft legislation distributing losses from the financial collapse.

      Michael Young

  • Commentary
    Diwan
    Has Sisi Found a Competent Military Entrepreneur?

    Mustaqbal Misr has expanded its portfolio with remarkable speed, but a lack of transparency remains.

      Yezid Sayigh

  • Research
    Arab Diaspora Business Communities in Egypt

    Arab diaspora business communities in Egypt often mirror the same systemic challenges facing Egyptian businesses.

      • +4

      Nur Arafeh, Yezid Sayigh, Qaboul al-Absi, …

  • Article
    Saudi Arabia in Africa: Sound Economic and Geopolitical Strategy, or Resource Exploitation?

    Largely characterized thus far by a single-minded focus on extractivism, Riyadh must commit to greater equitability in its approach to investment and development deals with Sudan, Ethiopia, and Eritrea.

      Hesham Alghannam

  • A picture taken from a position at the Israeli border with the Gaza Strip shows the destruction due to Israeli bombardment in the besieged Palestinian territory on May 18, 2025
    Article
    Destruction, Disempowerment, and Dispossession: Disaster Capitalism and the Postwar Plans for Gaza

    Once Israel’s war in the territory is brought to an end, the foundational principles guiding reconstruction should be Palestinian self-determination, local agency, and sovereignty.

      Nur Arafeh, Mandy Turner

Get more news and analysis from
Malcolm H. Kerr Carnegie Middle East Center
Carnegie Middle East logo, white
  • Research
  • Diwan
  • About
  • Experts
  • Projects
  • Events
  • Contact
  • Careers
  • Privacy
  • For Media
Get more news and analysis from
Malcolm H. Kerr Carnegie Middle East Center
© 2026 Carnegie Endowment for International Peace. All rights reserved.