New Delhi: Raghuram Rajan, the Chicago University professor who chaired a panel that took a comprehensive look in 2008 at financial sector reforms in India, had an interesting take on the sector.
As a panellist in a session on the economy at the India Economic Summit, Rajan said policy reaction in India to the financial crisis should be about taking more risks because the pay-offs are big.
On public sector bank consolidation, Rajan did not see a compelling reason for immediate movement.
“As far as bank consolidation, I’m not sure it should be forced. Because bank mergers are such a difficult task in general, I think banks should figure out how they do it. There is an added twist to that issue in India because the banks are public sector banks and it is unclear how the decision making process would take place there,” Rajan said.
Rajan did not find the current level of freedom on India’s capital account to be a handicap for companies.
The regulations are really about tweaking at the margins for billion dollar deals as free movement of capital within certain limits is already allowed, Rajan said.