Deepak Nayyer talks about capabilities created in Development Financial institutions (DFIs) for longterm lending.
These DFIs are very important in creating a capability for lending to special investments. India, till 2000, had developed the capabilities to lend to infrastructure, sector-wise capacity creation etc. We need the concentration of skills in one place. This way, special knowledge reduced the risk for lending.
The commercial banks decided to reduce the lending risks by consortium lending. That is a statistical approach to risk mitigation.
Now Deepak Nayyar wants to create a National Development Bank. That I think is a bad idea. Though there may be some merit in creating a network of professionals who can lend to industry and towards infrastructure. These professionals can be monitored using DIN-like number (Director identification number) and their investments performance tracked. These people may be employed with commercial banks but without sign-off from these persons, such loans will not be approved.
What we are creating is attribution chain. I have discussed the importance of attribution in both of my books - Subverting Capitalism and Democracy and Understanding Firms. Please use the links below to check out the books.