Dr Arvind Panagariya On How Banks Have Emerged From The Shadow Of Political Influence

The evolution of the Indian banking sector has seen significant shifts, moving from the era of 'phone banking,' characterized by informal calls from ministries to banks to sanction loans, to the present day. Dr. Arvind Panagariya reflects on this evolution, particularly highlighting the past challenges of non-performing assets (NPAs) that plagued the sector. While the NPA crisis is now largely resolved, he cautions against complacency, acknowledging the unpredictable nature of finance. Panagariya emphasizes the need for continued vigilance and reform, suggesting that the current health and stability of banks present an opportune moment for privatization. He argues that privatization could introduce market pressures, enhancing efficiency in the banking sector. Proposing a gradual approach, he suggests initiating privatization in the next government term, allowing for careful assessment of its impact on bank performance before expanding the process further.