EFFECT OF LIBERALISATION OF THE BANKING SECTOR ON INDIAN ECONOMY

After decades of zealously protecting their banking markets, in the 1990s Indian economy began to eliminate barriers to Foreign Direct Investment in the banking sector. For Indian economic policy decision makers, this opening raised urgent and complex policy questions. The opening of banking sector can bring real benefits but it also can introduce new financial risks and vulnerabilities. The opening of the banking sector has been making headlines in recent years: The issue was hotly debated by the U.S. and Russian negotiators during WTO accession talks in 2006, Indian government has pledged greater opening of its banking sector by 2009. This book surveys the lessons and insights that major developing country policymakers(including India's) drew and can draw from the academic literature and from the experiences of countries that have opened their banking sectors in the recent past. This book makes several recommendations to ensure that foreign entry delivers the most benefits while introducing the least amount of risk by addressing the banking system's structural problems before or in parallel with the opening of the banking sector.