What Do Banks (Not) Do?

In many ways the banking system in India, including the regulatory apparatus, remains a product of the planning years. It seems to be a system that was conceived for a world where people were expected to do what they were told, and things happened as they were meant to. The real challenge, whether public control remains or not, is to create a banking system for a world where investors take risk and sometimes fail, where bankers need to take initiative and use their judgment. We need incentives for bankers that reward success but make allowances for bad luck, which at the same time guard against the temptation to be irresponsible or corrupt.