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Indian banks and the prevention of corruption Act: Freedom and discipline

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  • Ashima Goyal

    (Indira Gandhi Institute of Development Research)

Abstract

Selfless activists like Mr. Pai teach us the importance of continuously interrogating the functioning of our democracy. The NPA issue has persisted for almost a decade. It has eroded the profitability of banks, and is a problem for depositors, although sovereign guarantee mitigates concerns. Since large infrastructure loans were made to private firms, there were fears of private enrichment at the expense of the tax-payer. The institutions to curb corruption were geared to a control regime, and in the post-reform market-based system did not make the crucial distinction between crime and risk-taking. Their actions paralyzed decision-making and delayed resolution. The Prevention of Corruption Act has recently been amended, but partly because the differing requirements of a control and market-based system are not well-understood some have criticized it as being too soft on corruption while others see it as continuing to hurt decision-making. After examining the combination of discipline and freedom a market-based system requires we assess the 2018 amendment on those criteria. We also more broadly examine changes in incentives and social norms that are likely to reduce corruption as well as resolution delays.

Suggested Citation

  • Ashima Goyal, 2018. "Indian banks and the prevention of corruption Act: Freedom and discipline," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2018-021, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2018-021
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2018-021.pdf
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    References listed on IDEAS

    as
    1. Ashima Goyal, 2013. "Sustaining growth: Interests versus institutions," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Basu, Kaushik, 2011. "Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal," MPRA Paper 50335, University Library of Munich, Germany.
    3. Ashima Goyal, 2014. "Banks, policy, and risks: how emerging markets differ," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 10(1/2/3), pages 4-26.
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    Cited by:

    1. Ashima Goyal, 2019. "What Explains the Volatility of India's Catch-up Growth?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Ashima Goyal, 2019. "What Explains the Volatility of India’s Catch-up Growth?," Working Papers id:13026, eSocialSciences.

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    More about this item

    Keywords

    Public sector banks; Non-performing Assets; Prevention of Corruption Act;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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