CONCLUSION

This amendment can be considered a progressive step and gives huge enabling powers to RBI which would
play a key role in solving the existing problems related to bad loan and stress assets. Apart from
Amendments to the Banking Regulations Act, amendments to the SARFAESI and Debt Recovery Tribunal
Acts, and the enactment of the Insolvency and Bankruptcy Code indicate the Government’s firm
determination to find a satisfactory solution to the NPA resolution problem.

The Ordinance amending the Banking Regulation Act will fasten the NPA resolution process by
empowering the RBI in giving specific directions to banks. It will also protect bankers from any
investigative counterblast in future as the resolution process will have the support of Oversight Committees
certified by the RBI.

Optimal banking structure defined by relative size, accessibility and outreach, and allocation of credit is
evaluated from empirical data for changes consistent with dynamic needs of Indian economy during reform
era. Despite significant movements on the above parameters, ideal accomplishments were far from
satisfactory, and thus further reforms were needed. Reserve Bank of India imposed deregulation and
prudential norms for reforming banks that have made substantial impact on banks’ balance sheet and other
performance variables. Consolidation and restructuring initiatives muted by policy constraints and
consequences were marginal variations in the level of concentration and competition in Indian banking.
Market-oriented banking reforms contributed to performance of banks. Notable achievements were lower
average cost combined with growth of total factor productivity, superior profitability and intensive
advanced technology adoption. But current high non-performing assets ratio is a drag on banks’ profitability
as it was the case in 1990s despite a drastic fall in the ratio in intervening years followed by its upward
trend in post-global crisis.

The Act provides a framework under which commercial banking in India is supervised and regulated. The
Act supplements the Companies Act, 1956. Primary Agricultural Credit Society and cooperative land
mortgage banks are excluded from the Act. The Act gives the Reserve Bank of India (RBI) the power to
license banks, have regulation over shareholding and voting rights of shareholders; supervise the
appointment of the boards and management; regulate the operations of banks; lay down instructions for
audits; control moratorium, mergers and liquidation; issue directives in the interests of public good and
on banking policy, and impose penalties. In 1965, the Act was amended to include cooperative banks
under its purview by adding the Section 56. Cooperative banks, which operate only in one state, are
formed and run by the state government. But, RBI controls the licensing and regulates the business
operations. The Banking Act was a supplement to the previous acts related to banking.
Indian banking system will further grow in size and complexity while actingas an important agent of
economic growth and intermingling different segments of the financial sector. It automatically follows that
the future of Indian banking depends not only in internal dynamics unleashed by ongoing returns but also on
global trends in the financial sectors.

Future Outlook:

Although, the adoption of technology in banks continues at a rapid pace ,the concentration is perceptibly
more in the metros and urban areas. The benefit of Information Technology is yet to percolate sufficiently to
the common man living in his rural hamlet. More and more programs and software in regional languages
could be introduced to attract more and more people from the rural segments also. Standards based
messaging systems should be increasingly deployed in order to address cross platform transactions. The
surplus manpower generated by the use of IT should beused for marketing new schemes and banks should
form a 'bra ins trust comprising domain experts and technology specialists.