1. Reforms in Indian Financial system
The new economic policy of structural adjustment
And globalization programs was given a big thrust
In India in 1991 reforms.

2. PRIOR TO INTRODUCTION OF
BANKING PEOPLE USED TO KEEP
THEIR MONEY IN POST OFFICES
OR IN PIGGY BANK AND LEND
MONEY FROM SAHUCARS

3. Banking is "accepting, for the
purpose of lending or investment
of deposits of money from the
public, repayable on demand or
otherwise and withdraw able by
cheese, draft, order or otherwise

4. WHY NEED FINANCIAL REFORMS …
 Change in rule of thumbs
 Financial institutions and markets were in
bad shape
 Banking sectors suffered from lack of
competitions
 Low capital base, low productivity
 High intermediation costs
 Note proper risk management system
Count………

5. Count……..
 Littal competition in insurance and mutual
fund industries
 High transaction cost
 Control over pricing of financial
 Banks were running at a loss or very low
profit
 Weakling of management and control
functions
 Imposition of high CRR, SLR and Directed

6. OBJECTIVES OF FINANCIAL REFORMS
 To develop a market oriented, competitive
world
 Increase the allocative efficiency of available
savings and in real sectors
 Bring about the effectiveness, accountability,
profitability, BOP growth and flexibility
 Increases the rate of returns on real
investment
 Insure that the rationalization of interest rate

7.  To reduce level of resources pre-emption and
to improve the effectiveness of directed credit
program
 To build a financial infrastructure related to
supervision
 To modernize the instrument of monetary
control
 To promote competition b y creating level
playing fields and facilitating free entry

8. MAJOR REFORMS AFTER 1991
 Systematic and policy reforms
 Banking reforms
 Primary and secondary stock
market reforms
 Government securities market
reforms
 External financial reforms

9. SYSTEMATIC AND POLICY REFORMS ………
 interest rate in economy deregulated
 The SLR on incremental net domestic and
time liabilities of banks reduce from 38.5% in
1991-92 to 25%
 The CRR reduced from 15% in 1991-92 to
10% 1995-96
 Recovery of debts due to banks and financial
institutions act 1993 passed to set up special
recovery
Count………..

10. Count………..
 Private sectors allowed to set up banks
mutual funds, money market, insurance
companies to 51%holding of government
 SEBI made a statutory body in February
1992
 The RBI (amendment ) 1997
 Over the Counter Exchange of India (OTCEI)
and NSE with nation wide stock trading and
electronic display established

11. BANKING REFORMS……….
 The SBI and other nationalized banks
enabled to access the capital market for debt
and equity.
 Classification of new assets and provisioning
for bad debts for commercial banks,
including rural banks.
 The performance obligation and commitment
obtained by RBI from each bank.
 Banks make balance sheet fully transparent
and make full discloser in keeping with
international account standard committee

12.  Bank given greater freedom to open, shift &
swap branches
 Budgetary support extended for
recapitalization of weak public sectors banks
 Banks set free to fix their own foreign
exchange e upon position limit subject to RBI
approval
 Loan system introduced for delivery of bank
credit

13. PRIMARY AND SECONDARY STOCK MARKET
 Mutual funds permitted to underwriter public
issue
 The stock exchange required to disclose, carry
forward position scrip-wise
 Depositary act 1996 passed proved to legal
framework
 Stock exchange asked to collect 100% of daily
margins on notional loss of broker for every
script to restricted gross trade value to 33.33
times brokers base minimum

14. GOVERNMENT SECURITIES MARKET REFORMS
 A 364-day treasury bill replaced in the 182
days in 1992-93
 Auction of 91 -day TB commenced from Jan.
1993
 Maturity period of new issue of center
government securities from 20 to 10 years
 For state government securities from 15 to
10 years

15.  Six new instruments introduced :
(a) zero coupon bonds on 18.1.94
(b) tap stock on 29.07.94
(c) partly paid govt. stock on 15.11.94
(d) an instrument combining the feature
of tap and partly paid 11.09.95
(e) floating rate bonds on 29.09.95
(f) capital indexed bond in 1997

16. EXTERNAL FINANCIAL REFORMS
 Flexible exchange rate system
 Foreign institutional investors (FIIs) allowed
access to Indian capital market with SEBI
 Indian company permitted to access
international capital markets through various
instruments including euro-equity issue
 Union budgets 1997-98 proposed the
replacement FERA 1973by FEMA

17. IMPACT OF FINANCIAL REFORMS
 Operating profit.
 Non performing assets .
 Secondary market reform.
 Financial liberalization.
 Foreign exchange market and foreign capital
flow.

18. VIEWS FROM ABROAD AGAINST FINANCIAL
LIBERALIZATION…….

19. FUTURE AGENDA FOR REFORMS…….
 As a part of operational reforms.
 Introduce heavy securities transactions tax.
 Total public debt in India has phenomena.
 New economic policies.

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