A ppt regarding the banking sector reforms in India

1. The Banking Sector Reforms In
India And Their Impact On The
Economy
DISSERTATION PROJECT
RISHI . KUMAR
46

2. INTRODUCTION
• From the 1991 India economic crisis to its status of third largest economy
in the world by 2011, India has grown significantly in terms of economic
development. So has its banking sector.
• During this period, recognising the evolving needs of the sector, the
Finance Ministry of Government of India (GOI) set up various committees
with the task of analysing India’s banking sector and recommending
legislation and regulations to make it more effective, competitive and
efficient.
• The purpose of the Narasimham-I Committee was to study all aspects
relating to the structure, organisation, functions and procedures of the
financial systems and to recommend improvements in their efficiency and
productivity.
• The Narasimham-II Committee was tasked with the progress review of
the implementation of the banking reforms since 1992 with the aim of
further strengthening the financial institutions of India. It focussed on
issues like size of banks and capital adequacy ratio

3. • OBJECTIVE OF STUDY
• The main objective of the research paper is to make a simple assessment of
the banking sector reforms in India. It has been more than 20 years of the start
of the economic reform in India and the financial sector reform was one of the
important parts of the process.
• The study will try to list the major reforms of the Indian baking sector and to
find out the impacts of these reform and the future prospects. The study will
be confined to the impacts of reforms upon credit delivery, share of market of
banks, profitability and prudential regulations, and the economy.
• SCOPE OF THE STUDY
• The study focuses on the banking sector as a whole. As the reforms are a
general initiative for all banks to follow, the study is a macro perspective
research. The study also looks from a macro level at the economy of India as
the effects of the reforms are being checked on it.

4. RESEARCH METHODOLOGY
• The term research methodology can be defined as a process used to collect data and
information for the purpose of making business decisions. The methodology may
include publication research, interviews, surveys and other techniques.
• Here, the methodology used is DESCRIPTIVE .
Data Collection:-
• The type of data that is used in the study is stated here.
• For this study, we have relied totally on research papers and various articles, thus
the type of data used here is SECONDARY data.

5. REFORMS INITIATED TILL 2005
• Reduction of Statutory Liquidity Ratio (SLR)
• Progressive reduction in Cash Reserve Ratio (CRR)
• Deregulation of interest rates
• Adoption of uniform accounting practices
• Imparting transparency to bank balance sheets and making more disclosures
• Setting up of special tribunals to speed up the process of recovery of loans
• Setting up of Asset Reconstruction Funds (ARFs)
• Restructuring of the banking system, so as to have 3 or 4 large banks, which could become
international in character, 8 to 10 national banks and local banks confined to specific regions.
Rural banks, including RRBs, confined to rural areas
• Abolition of branch licensing
• Liberalising the policy with regard to allowing foreign banks to open offices in India
• Rationalisation of foreign operations of Indian banks
• Giving freedom to individual banks to recruit officers
• Speedy liberalisation of capital market
• Supervision of merchant banks, mutual funds, leasing companies etc., by a separate agency to
be set up by RBI

6. REFORMS INITIATED SINCE 2014
• The Reserve Bank of India (RBI) also adopted new Consumer Price Index
(combined) as the measure for nominal anchor (Headline CPI) for policy
communication.
• Banks being allowed to raise capital from the market to meet capital
adequacy norms by diluting the government’s stake up to 52 per cent.
• Pradhan Mantri Jan Dhan Yojana launched to provide universal access to
banking facilities with at least one basic banking account for every
household.
• In order to improve the Governance of Public Sector Banks, the
Government intends to set up an autonomous Bank Board Bureau with
professionals as its members. It would be responsible for search and
selection of heads of PSBs, as also for Non-Official Directors on the
Boards of Banks.
• Consolidation of financial statements- Bank with its subsidiaries.
• Establishment of MUDRA and
• Recapitalisation of PSU’s with ₹ 25,000 crores in the next 3 years.

7. IMPACT ON THE ECONOMY
Changes in INTEREST RATES
Changes in RATE OF INFLATION
GROSS DOMESTIC PRODUCT Rate
Indicator
Current
rate
Inflation 6.00%
Bank rate 7.75%
CRR 4.00%
SLR 21.50%
Repo rate 6.50%
Reverse repo
rate
5.75%
Marginal
Standing
facility rate
7.75%

8. NIFTY SENSEX

9. Financial Inclusion
FOREX Reserves
The latest reserves stand at US$ 355560 million at the end of the week ending March 25th, 2016.

10. MAIN FINDINGS
1. Corporate governance
2. Risk management
3. Cash flow discipline
4. Group structure and business portfolio
5. Working capital management
6. Capital Structure
7. Increase in FDI
8. Financial Inclusion specially PMJDY
9. Competition between Private and PSU banks
10. Surviving Economic Shocks
11. Bad Debts and their recovery have become better
12. Diversifying Bank’s business
13. Increase in FOREX
14. The stabilization of Public debt as to GDP
15. Rise in the value of currency
16. Share in Global Economy

11. SUGGESTIONS
• A total restructuring of all the PSU banks is the need of the hour. It will not only cut
down the huge bad debt they have, but would also reduce the costs of staff and
operations. All the PSU’s should be clubbed under one big bank which would act as
the guardian bank.
• A streamlining of services needs to be done by the banks to raise the quality of the
services they provide.
• Better credit appraisal procedures need to be followed to avoid bad debts. Strict
CIBIL and appraisal norms should be implemented.
• Banks should tap more into the service sector to earn income thus depending less
on the interest income. This helps the banks to give more to the customers and save
more for investments. Services like issuance of more credit and debit cards, mutual
funds and provide more agency functions like trustee, trade credit, providing
various loans etc.

12. CONCLUSION
Reforms should be an ongoing process. They help the sector in which they
are implemented to become robust and change as per the situations
require. Banking sector is the most important part of any economy. It acts
as the arterial system of the economy which supplies money wherever
needed. Thus it should be reformed at regular intervals so that it doesn’t
become obsolete. The economy runs on money. It can only work properly
if the banking system is in perfect condition to fulfill the rising
requirements that arise.
It is due to the reforms and policies that the Indian banks are known to be
one of the most financially sound institutions in the world even after
surviving the 2008-09 global slowdown and the 2015 slowdown.
Hence, reforms play an important part for any sector or country to be
sound and strong

13. THANK YOU