Proposals that PSBs should only invest in government bonds may starve the real sector of credit. Photo: MintThe troubles of the banking sector, and public sector banks (PSBs) in particular, are well known. What we propose is to find a balance between completely discretionary lending and zero lending by PSBs. This is not entirely a new idea; glimpses of this model can be seen in the priority sector lending certificates market and the micro-loan securitization market where specialists trade assets with non-specialists in a markets framework. The Reserve Bank of India has innovated on the banking design in recent years with the introduction of the differentiated banking regime.

Source: Mint April 22, 2018 23:15 UTC