Government and RBI policies affect the banking sector. Sometimeslooking into the political advantage of a particular party, the Government declaressome measures to their benefits like waiver of short-term agricultural loans, toattract the farmer’s votes. By doing so the profits of the bank get affected.Various banks in the cooperative sector are open and run by the politicians. Theyexploit these banks for their benefits. Sometimes the government appointsvarious chairmen of the banks.Various policies are framed by the RBI looking at the present situation of the country for better control over the banks.
FOCUS ON REGULATIONS OF GOVERNMENT
Indian Banking is least affected as compare to other developed economywhich is attributed to Reserve Bank of India for its robust policy framework,stricter prudential regulations with respect to capital and liquidity. This gives Indiaan advantage in terms of credibility over other countries.Government affects the performance of banking sector most by legislatureand framing policy .government through its budget affects the banking activitiessecuritization act has given more power to banking sector against defaultingborrowers.