reforming the indian financial system：印度金融体系改革.pdf

Reforming the Indian ?nancial system Ajay Shah, Ila Patnaik Working Paper 2011-80 January 2011 National Institute of Public Finance and Policy New Delhi Reforming the Indian ?nancial system Ajay Shah Ila Patnaik ? January 28, 2011 Contents 1 Current structure of the ?nancial system 3 Finance and the economy . . . . . . . . . . . . . . . . . . . . 3 Financial repression . . . . . . . . . . . . . . . . . . . . . . . . 5 Protectionism . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Public ownership . . . . . . . . . . . . . . . . . . . . . . . . . 6 Central planning . . . . . . . . . . . . . . . . . . . . . . . . . 7 Regulatory and legal arrangements . . . . . . . . . . . . . . . 7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2 The di?culties of this approach 9 Financial repression . . . . . . . . . . . . . . . . . . . . . . . . 9 Protectionism . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Public ownership . . . . . . . . . . . . . . . . . . . . . . . . . 11 Central planning . . . . . . . . . . . . . . . . . . . . . . . . . 12 Regulatory and legal arrangements . . . . . . . . . . . . . . . 13 3 Economic consequences of these di?culties in ?nancial pol- icy 15 4 What changed in recent decades? 17 The revolution of the equity market . . . . . . . . . . . . . . . 17 Entry of private banks . . . . . . . . . . . . . . . . . . . . . . 18 Capital account liberalisation . . . . . . . . . . . . . . . . . . 19 The RBI Amendment Act of 2006 . . . . . . . . . . . . . . . . 20 ?This paper was prepared as a background paper for the ing OECD Economic Survey of India. 1 Fiscal transfers to public sector ?nancial ?rms . . . . . . . . . 21 Critical ?nancial infrastructure of the bond market . . . . . . 22 Institution building of IRDA and PFRDA . . . . . . . . . . . 23 Payments system . . . . . . . . . . . . . . . . . . . . . . . . . 24 5 Iss