Financial development, economic growth and banking sector controls: evidence from India

Article Abstract:

Banking sector controls are inversely related to financial development because they are mainly based on traditional macroeconomic factors. Data from the Reserve Bank of India indicate that this negative relationship can be partly neutralized by direct monitoring of banking sector controls and evaluating the causality by using dynamic financial and economic models. It is suggested that policies that affect financial development can have similar effect on economic growth.

Commercial Banks, Commercial Banking, Models, Economic development, India

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The appropriate role of bank regulation

Article Abstract:

Bank regulations can be implemented to reduce contagious runs on solvent banks and avoid economic downturn caused by bank failure. These regulations applies when a bank's capital-to-asset ratio falls below the government-required ratio. However, bank regulations also increases the agency costs without reducing the risks in value of money. The findings partly support the free banking system but imply a need for a positive instead of restrictive government interventions.

Laws, regulations and rules

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Why the banking system should be regulated

Article Abstract:

The banking system should be regulated to prevent financial collapse caused by poorly supervised institutions which are empowered to produce and control the value of money. These institutions need government intervention in the form of capital requirements and deposit insurance. Although such regulations increase agency costs, the benefits exceed the costs when the trade off involves the avoidance of economic collapse that may result from unregulated financial system.

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