An essay on banking and macroeconomics: role of public sector banks in India

Abstract

In India, banks have played an important role in economic growth and development. Since the 1970s, public sector banks (PSBs) have been in the forefront of mobilizing resources from far flung rural areas as well as extending banking services in the remotest parts of the country. The burden of social agenda has largely been shouldered by PSBs without any compensation. Therefore, in the interest of maintaining credibility of PSBs which account for nearly 70 percent of banking activity in the country, the government is justified in recapitalizing the PSBs regularly. However, there is need to undertake research on evolving appropriate norms, granular, for evaluating performance of different banks operating in India without stifling flow of credit to productive sectors