In India, banks were professed to be the champion of balanced growth and poverty reduction. Reduction in regional disparities was one of the prime objectives behind social control and nationalization of banks prior to the nineties. Some of the major measures taken to achieve the above objectives were opening of bank branches, far and wide, covering rural and urban areas, targeted lending to priority sectors and selected groups of people and occupations such as small borrowers, and farmers. These efforts were aimed to give boost to the less developed regions and small borrowers. Yet did the banks help in reducing regional disparities particularly since 1991?
Among the different bank groups, public sector banks by their very nature are expected to help achieve economic growth in the less developed regions. The second question which arises is: Are the public sector banks actually assisting the less developed regions in their growth story? In this study in a panel dataset covering 25 states of India using Generalised Methods of Moments panel estimation techniques we examine the role of banks (including public, private and foreign banks) on regional economic development in India.
Rashmi Umesh Arora is a Research Fellow in the Department of Accounting, Finance and Economics, Griffith Business School, Griffith University, Australia. In 2007 she was a postdoctoral research fellow at the Centre for Asia Pacific Social Transformation Studies, University of Wollongong, Australia. She has also worked in Reserve Bank of India (India’s central bank) in its economic policy department for several years. She holds MPhil in Applied Economics from Jawaharlal Nehru University, New Delhi and PhD in Development Studies from University of Auckland, New Zealand.
Her areas of research interest are economic development, reforms, finance and development, less developed regions and globalisation.