NYT: How Indian banks avoided a crisis?

This article explains concisely how and why the Indian banking system remains robust despite the growing crisis.

India is a highly regulated system and all applications for new foreign banks or expansion of local banks are given out very carefully and slowly, without any discrimination. One of the mainstays of giving out licences for branch expansion or of entry into the Indian banking system by foreign banks is the condition to open branches in rural and/or semi urban areas (of which there are many, India still has over 60% of it's population, out of 1.3 billion, designated as poor and living mostly in rural areas).

The Central Bank of India, named RBI or Reserve Bank of India, also has a political and social mandate, i.e. mainly not to allow the banks to fail due to the political ramifications on the poor.

The article explains very well, as to what the Indian bankers think, after the crisis and what they thought prior to the crisis. Actually, they are very happy since the regulators did their jobs well and did not allow banks to expand so much that they could not manage themselves, all in the pursuit of profits, which have evaporated as quickly as they came and many international banks have been embarassed by their lack of external and internal controls.

It appears that the western model of banking is failing due to its sole focus on profitability at the cost of everything else including political and social costs. A new model just like in Spain, where loans cannot be securitized easily just like India's regulatory system may be the answer to future stability of the global financial system.

How India Avoided a Crisis
Published in New York Times, Dec 19, 2008

P.S. Nudge, nudge, wink, wink: I work for an Indian bank these days.