ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Narrow Banking Theory Evidence and Prospects in India

The narrow banking proposal defining a class of safe and liquid assets (generally sovereign government securities) for investments by weak banks, backed fully by demand liabilities (generally non-interest bearing deposits) has been considered as a means of deposit protection and a possible solution to the banking problems. We seek to explain the theoretical implications of the proposal and examine its implications for the Indian public sector banks facing large non-performing bans.

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