REFORM S IN INDIAN

BANKING

NEED
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Good progress in geographical coverage Profitability - low Large volume - NPAs June 1991 - Foreign exchange reserves - a low level –

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US $ 1
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billion = equal to two weeks imports

August 1991 inflation - 17 per cent Reforms to improve the economic situation

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REFORMS
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August 1991 - High Level Committee - Chairmanship - Sri Narasimham Narasimham Committee –

M.

Committee on Financial System (CFS)
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To examine all aspects relating to the financial system Again in 1998

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REFORMS IN REAL SECTOR
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Stabilization of economy – control BOP & Inflation Deregulation Removal of the licence Liberalization of international trade – promotion of Globalization - international capital and modern

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competition
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technology

REFORMS IN FINANCIAL SECTOR
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Improve the financial health of banks and Development Transformation from highly regulated to more marketReduction in Ratios –

Financial Institutions (DFIs)
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oriented
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CRR + SLR - 63.5 % net demand and time liabilities (NDTL) CRR - 5 % from 17.1.2009 SLR - 24 % from 8.11.2008

REFORMS IN FINANCIAL SECTOR
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Interest Rate Deregulation –

Pre-reform period - Government securities & advances - regulated by the RBI Reforms – Market forces with restrictions – PLR – SB Rates

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Prudential Norms –

Capital Adequacy Income Recognition Asset Classification

REFORMS IN FINANCIAL SECTOR
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Recapitalization of Public Sector Banks (PSBs) –

GOI - Capital Contribution in PSBs Performance & commitments Divestment in PSBs Public issues Roles of BOD & External Auditors defined Audit Committee

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Equity Capital by Banks

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Corporate Governance

REFORMS IN FINANCIAL SECTOR

Disclose – Capital Adequacy Ratio, Net NPAs to Adv. Policies for investments, ALM, loan recovery Loan policy Interest rate policy Recovery management Recruitment without centralized recruitment process

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Autonomy in Operations

REFORMS IN FINANCIAL SECTOR
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New Private Sector Banks

January 1993 - RBI guidelines - entry of new private sector banks Approvals - new foreign banks Existing foreign banks - expand branch network LIC & GIC Monopoly Opening up of insurance sect. for private participation

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Insurance Reforms

REFORMS IN FINANCIAL SECTOR
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Debt Recovery Tribunals Banking Ombudsman

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Quicker & inexpensive adjudication of customer complaints Banking Ombudsman scheme - June 1995 Revised in 2002 2009 -15 Banking Ombudsman in India One office – Mumbai

THANK YOU

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