• Research
  • Emissary
  • About
  • Experts
Carnegie Global logoCarnegie lettermark logo
DemocracyIran
  • Donate
{
  "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 Carnegie Endowment for International Peace

  • Commentary
    Strategic Europe
    Taking the Pulse: Does the EU Have a France Problem?

    With its public finances in shambles, the far right polling at 35 percent ahead of the 2027 presidential election, and a growing protest movement, is France’s crisis a threat to the EU’s geopolitical awakening?

      • Rym Momtaz

      Rym Momtaz, ed.

  • Commentary
    Carnegie Politika
    How the Latest Election Changed the Role of Russia’s Parliament

    Putin’s conservative staffing policies and search for ever greater control have cemented parliament’s transformation into a bureaucratic appendage of the executive branch.

      Andrey Pertsev

  • Commentary
    Carnegie Politika
    Stalled at the Front, Russia Seeks to Undermine Ukraine’s Economic Capacity

    Russian strikes are weakening the economy sustaining Ukraine’s war effort. Closing the growing funding gap will require more European support and politically contentious reforms in Kyiv.

      Balázs Jarábik

  • Commentary
    Carnegie Politika
    Turkmenistan’s Ruling Duo Is Having a Family Feud. Will Their Regime Survive It?

    Ex-president Gurbanguly Berdimuhamedov remains interested in politics, but his son Serdar, Turkmenistan’s current president, is becoming increasingly independent and willing to break with his father’s legacy. If their covert rivalry goes too far, both risk losing power.

      Galiya Ibragimova

  • Crowds and businesses on the streets of Colombo, Sri Lanka
    Article
    Sri Lanka’s Economic and Geopolitical Balancing Act

    Economic recovery has brought Sri Lanka a modicum of stability, but domestic strains and great-power rivalry could test how long it lasts.

      • Avinash Paliwal

      Avinash Paliwal

Get more news and analysis from
Carnegie Endowment for International Peace
Carnegie global logo, stacked
1779 Massachusetts Avenue NWWashington, DC, 20036-2103Phone: 202 483 7600
  • Research
  • Emissary
  • About
  • Experts
  • Donate
  • Programs
  • Events
  • Blogs
  • Podcasts
  • Contact
  • Annual Reports
  • Careers
  • Privacy
  • For Media
  • Government Resources
Get more news and analysis from
Carnegie Endowment for International Peace
© 2026 Carnegie Endowment for International Peace. All rights reserved.