Developments in the Indian Financial Sector

Although the Indian financial sector has undergone fundamental changes since the 1990s, it continues to be influenced by the pre-existing institutional framework and is charaterized by an important duality. Both with regard to financial markets and the banking sector, the private sector today comprises effective and forceful actors evolving in a competitive international environment. On the other hand, the public banking sector, still significant even though its share has decreased rapidly, is confronted by a series of structural problems that it is striving hard to overcome, namely the significant number of bad debts and a large unproductive workforce. This makes it necessary for it to resort to repeated recapitalization. Financial inclusion is moreover still very inadequate. The above spells out the need for further deep-seated reforms.