Regulations must to restrict size of banks: Stiglitz
Reuters
MUMBAI: There is a need to have strong regulations in place to restrict the size and interconnectedness of banks, said Joseph Stiglitz, the 2001 Nobel prize winner in economics.
Joseph Stiglitz’s comments assume significance in the wake of Finance Minister P. Chidambaram insisting that India must have at least two-three world-sized banks.
“We must create at least two-three world-size banks, even China has done it,” Chidambaram said at the recent banking conference Bancon in November. He also added that new business models will inevitably lead to some consolidation among banks.
In 1998, Reserve Bank of India-appointed Narasimham Committee on Banking Sector Reforms had recommended restructuring of the banking system to create three-four large banks, which could become international in character, and 8-10 national and local banks. No serious attempt at consolidation in the public sector banking space has happened, though.
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