Impact of liberalization and globalization on productivity in Indian banking: A comparative analysis of public sector, private, and foreign banks

In an economy that has been under strict government control over years, the main components of Liberalization are public sector downsizing (if not elimination) creating room for domestic firms and allowing entry of foreign firms. In this respect, Indian banking industry provides an ideal setting for evaluating the impact of Liberalization and removing entry restrictions. India, though dominated by public sector banks, already had a significant presence of private domestic banks and foreign banks. Banking reforms have created a more level playing field where all banks compete within a new set of broad (and far more relaxed) regulations. Data on the performance of the three different categories of banks over the past two decades offer an opportunity to assess to what extent regulatory changes have improved the productive efficiency of the Indian banking sector.

Related Subject(s): Economic and Social Development

Countries: India