Executive Education Programs

The relevance of development banks and financial institutions in the modern-day Indian context has been the subject of considerable debate in recent years.  In part, the debate has been sparked by the large bailouts that have had to be given to prominent financial institutions in the country and whether these moves were justifiable, given the use of taxpayers’ money.  The debate has been further amplified by the fact that many of the development financial institutions (DFIs) of yester-years have gradually transformed themselves either into commercial banks or investment banks or a combination of both.  While it would be entirely correct to suggest that there needs to be re-orientation of the core objectives of DFIs as well as better management practices so as to minimize the extent of non-performing assets, to stretch the argument and suggest that DFIs have lost their relevance in today’s context, however, is somewhat akin to “throwing the baby out with the bath-water.”  By their very definition, development banks would be needed, as long as the process of economic development is incomplete.  The specific forms of assistance provided by DFIs may have to undergo change from time to time as economic development proceeds and the financial sector evolves.  However, there can be few arguments to suggest that there is no role for development banks and the existing commercial banks or investment banks can instead perform their functions in an economy based on imperfect market forces.