Banking regulation is never easy. Shifting regimes and tightening things up a bit during a rip-roaring global economy, however, makes it much less stressful. Among global banking systems the one in India has lagged. Much of the rest of the world had moved on to higher capital requirements in addition to (sappy) liquidity constraints long ago so as to keep something like 2008 from happening again.
It has only served to demonstrate just how little regulators figured out about that supposedly long ago crisis in any one place let alone across the world. To catch up with fighting the last problem, the Reserve Bank of India alongside state banking authorities have been pushing banks to hold more capital. Until this year, that is.
Last month, under intense pressure from the government, India’s central bank relented before imposing the last part of higher capital requirements. These were strengthened in 2017 with every expectation counting on continuing the process, but the world in 2018 is very different.