Banking structure: plausible vision, flawed approach of RBI

Abstract

F ollowing the crisis of 2007, there is renewed focus the world over on banking structure. This encompasses a number of related matters: the size, scope and number of banks, consolidation and concentration, and the degree of competition. Getting the structure right is about getting the balance right between effi - ciency and stability in banking while striving for greater inclusion. A misplaced focus on effi ciency can bring on a banking crisis and associated economic turmoil. Focusing too much on stability can breed ineffi ciency, which could prove a drag on growth and lead to a crisis as well. Inclusion is a priority but, if not pursued effi ciently, it will undermine stability and cannot be sustained.