In quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail bankingmortgages and investment services are expected to be strong.
June 14, Topic: The truth is that neither of these approaches corrected the underlying problems with risk controls, management, and supervision at public-sector banks. As a result, India has faced crisis after crisis in its banking sector, with no solution in sight. In light of this, India has considered more radical proposals to shake up the banking sector, and many of these are debated ad nauseam.
Alternatively, others have suggested that the government should merge some of the smaller public-sector banks to cut costs, centralize talent and best practices, and simplify regulatory oversight.
In addition, others have advocated that the government should completely privatize the public-sector banks all at once. While each of these proposals has merit, it is unlikely that any of these solutions will become feasible in the near term.
Furthermore, the need to promote financial inclusion through state-directed lending and the complexity of operationalizing radical changes to a large banking sector ensure that the pace of change will be slow.
Market forces can often be more effective than regulatory and political mandates. Fortunately, the RBI has already made some progress in this direction. In August it started to liberalize the policy for issuance of new bank licenses, dubbed "on tap" licensing.
Prior to the introduction of this new policy, India issued new banking licenses only once a decade. But the RBI needs to go a step further. The new licensing policy has not yet lived up to its aims.
Review of banking laws: The committee considered that there was an urgent need for reviewing and amending main laws governing Indian Banking Industry like RBI Act, Banking Regulation Act, State Bank of India Act, Bank Nationalisation Act, etc. This up gradation will bring them in line with the present needs of the banking sector in India. Introduction. As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in . Banking Sector Reform in India Essay Economic Reforms of the Banking Sector In India Indian banking sector has undergone major changes and reforms during economic reforms. Though it was a part of overall economic reforms, it has changed the very functioning of Indian banks.
As of mid, only one firm had applied for a new license. The RBI should consider loosening the policy further to encourage more applicants. For example, it could reduce the minimum equity threshold, remove the requirement that applicants be Indian residents, remove the demand that banks open twenty-five percent of their branches in unbanked areas.
Also, the RBI could also reduce the obligation for new banks to adhere to the same priority sector lending targets as all scheduled commercial banks. Further competition in the banking sector would be a crucial market-driven instrument that could force change on an industry that has been averse to reform.
The role of state-directed lending can then be limited to advancing financial inclusion objectives. Second, increased competition would help induce operating reforms in PSBs, because market pressures would force them to compete effectively against new, more nimble banks.
Competition would also partially obviate the need for the RBI to dictate operating reforms ham-handedly.
Third, issuing licenses to new domestic and foreign banks would bring new talent into the sector, facilitate knowledge transfer, and alleviate the longstanding underlying human capital shortage.
Finally, fourth, this policy can likely be implemented with less direct interference from the government.
The Indian banking sector is broadly classified into scheduled banks and non-scheduled plombier-nemours.com banks included in the Second Schedule to the Reserve Bank of India Act, are Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks. BANKING SECTOR REFORMS IN INDIA SINCE In , the country was caught into a deep crisis. The government now decided to introduce comprehensive economic reforms. The banking sector reforms were part of this package. Jun 29, · Employees of public sector banks in India have gone on two-day nationwide strike on Wednesday opposing banking sector reforms and outsourcing of .
For example, it would be much harder to convince the government to reduce its ownership in PSBs or to privatize the PSBs than to allow new entrants.
Of course, this approach is not without challenges. First, given the significant market share of PSBs, it will take time before new banks will be able to make a dent in the market share of PSBs and exert real competitive pressure. After NBFCs gain the benefit of deposit insurance, they will be able to reduce their borrowing costs and more rapidly increase lending volumes.
Another concern about introducing new, inexperienced banks into a stressed system is that it could exacerbate instability and increase oversight complexity for the RBI. However, there are ways to mitigate this risk from inexperienced new banks.
The government should consider expanding access specifically to foreign banks, which currently represent only six percent of all banking assets in India.The banking sector reforms in India were started as a follow up measures of the economic liberalization and financial sector reforms in the country.
The banking sector being the life line of the economy was treated with utmost importance in the financial sector reforms.
In fact, the banking sector has undergone several significant structural reforms, the capital markets are deeper and more liquid and equity markets are zooming up.
In , it was said by the Standard Poor that the Indian banking sector had .
India's Banks Need Reform Now. Recent reform efforts have focused too much on the symptoms of India’s banking crises, rather than on the sector’s underlying structural and operational weaknesses.
Unless India can find a way to shrink the state banking sector, it’ll be hard if not impossible to revive lending and investment.
Small enterprises in particular are desperate for bank finance. The Modi government may be right that “big bang” reforms -- liberalizing land and labor markets, for instance -- are too politically difficult.
In the context of economic liberalisation and growing trend towards globalisation (external liberalisation), various banking sector reforms have been introduced in India to improve the operation efficiency and upgrade the health and financial soundness of banks so that Indian banks can meet internationally accepted standards of performance.
Introduction. As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in .