Aishwarya and group
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This seminar presentation summarizes the banking reforms that have occurred in India over several phases. It discusses the growth phases of the banking sector from the evolutionary phase to the current reformatory phase beginning in 1991 in response to economic crises. Major reforms implemented include lowering reserve requirements, adopting prudential norms, allowing competition from new private banks, and increasing use of technology. Recent reforms granted more autonomy to public sector banks, introduced global banking standards and practices, and issued new banking licenses to expand access. The reforms aim to improve the financial health, profitability and inclusion of the Indian banking sector.
Aishwarya and group
- 1. Seminar presentation Topic: Banking Reforms in India Presented To: PRESTIGE INSTITUTE of MANAGEMENT, GWALIOR Presented by: AISHWARY AGARWAL ARCHIT BANSAL KHUSHAL AHUJA PRIYANSHU GUPTA
- 2. ACKNOWLEDGEMENT We, Aishwary Agarwal, Archit Bansal, Khushal Ahuja & Priyanshu Gupta, express our sincere gratitude to Dr. Abhay Dubey sir for giving us the opportunity to work under his/her guidance on the report entitled “BANKING REFORMS in INDIA”. We are grateful to our Director Dr. S. S. Bhakar, Dr. Sonal Saxena (Seminar Coordinator), Faculty Members and other friends for their valuable suggestions in the execution of report preparation. We are also thankful to other staff that guided and helped us very kindly at each and every step whenever we required. We also acknowledge & convey thanks to the library staff, computer department of PIMG for their kind and valuable support.
- 3. BANKING SECTOR IN INDIA:
- 4. GROWTH PHASES IN BANKING SECTOR: In over five decades since dependence, banking system in India has passed through five distinct phase, Evolutionary Phase (prior to 1950) Foundation phase (1950-1968) Expansion phase (1968-1984) Consolidation phase (1984-1990) Reformatory phase (since 1990)
- 5. BANKING REFORMS IN INDIA: The Indian banking sector is an important constituent of the Indian financial system. The banking sector plays a vital role of promoting business in urban as well as in rural areas in recent years. Without it India cannot be considered as a healthy economy. For the past three decades India's banking system has several outstanding achievements to its credit.
- 6. DECLINE IN PRODUCTIVITY AND PROFITABILITY:
- 8. REFORMATORY PHASE:(1991 Onwards) Reasons for the formation of the reforms: Continued financial profligacy of the Government coupled with close monitoring and control Decline in productivity and profitability Economic crises of 1991 Economy suffered from serious inflationary pressures, emerging scarcities of essential commodities and breakdown of fiscal discipline.
- 9. FIRST PHASE OF REFORMS OF BANKING SECTOR (1991): The Narasimha Committee I appointed to restore the financial health of commercial banks and to make their functioning efficient and profitable. Recommendations aimed at changes according greater flexibility to bank operations The Committee submitted its report in November 1991 with 23 recommendations.
- 10. IMPLEMENTED RECOMMENDATIONS: Lowering SLR and CRR Prudential Norms Capital Adequacy Norms Deregulation of Interest Rates Recovery of Debts Competition from New Private Sector Banks Phasing Out Of Directed Credit Access to Capital Market Local area banks Supervision from commercial banks
- 11. IMPACT ON INDIAN BANKING SECTOR: Intense competition Lowered pre-emptions Broadening the ownership base of PSBs Value Added Services
- 12. SECOND PHASE OF REFORMS OF BANKING SECTOR (1998): The Committee placed greater importance on structural measures and improvement in standards of disclosure and levels of transparency. Recommendations of Narasimha Committee II.
- 13. IMPLEMENTED RECOMMENDATIONS: New areas New instruments Risk management Customer service Universal banking Information technology Increase in FDI limit Mergers And Amalgamation Guidelines For Anti-Money Laundering Managerial Autonomy Increase of inflow credit Strengthen technology Base Rate System Of Interest Rates Adoption of global standards Management of NPAs
- 14. RECENT BANKING REFORMS: Granting of operational autonomy to public sector banks. Introduction and phased implementation of international best practices and norms. Setting up of Credit Information Bureau of India Limited (CIBIL) for information sharing on defaulters as also other borrowers. Introduction of automated screen-based trading in government securities through Negotiated Dealing System (NDS). Setting up of risk-free payments and system in government securities through Clearing Corporation of India Limited (CCIL). Phased introduction of Real Time Gross Settlement (RTGS) System.
- 15. BANKING LICENSES: The RBI has mandated new banks to open 25% of their branches in unbanked regions right from the beginning of its inception 25 applicants, approval to two applicants IDFC Limited and Bandhan Financial Services Private Limited Banking structure in India Small banks in private sector Licensing of payment banks Different bank targeting different people
- 16. KYC NORMS: Banks were advised to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority. Recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). Banks should frame their KYC policies incorporating the following four key elements: Customer Acceptance Policy; Customer Identification Procedures; Monitoring of Transactions; and Risk management. Money laundering rules and regulation.
- 17. TECHNOLOGY IN BANKING: Revolutionized banking practices WAN, INFINET, IPSS EFT Debit and credit cards Phone banking ATM Internet banking
- 18. EXPECTED OUTCOMES: Norms on NPA to improve asset quality, recovery, liquidity and the balance sheets of banks Consolidation of banks & new players to bring competition, innovation and productivity. It would also bring economies of scale Conversion of urban banks into commercial banks could aid them to operate in mainstream with lower risk. Higher technology usage to help in up gradation, design more e-products; also sustain and scale business Financial deepening to make banking more inclusive, improve geographical coverage, reduce regional imbalances and credit to the unorganised sector Summarizing The Reforms Long term relationship Pervasive in covering all problem areas Passed through a series of discussion Mentioned in the annual report of RBI
- 19. FUTURE OF BANKING: Multilayer banking structure Dilution of government stake PSBs Slow growth rate of the economy Difficulty in entry at the market level
- 20. “ ” THANK YOU Now the Floor Opens For Your Queries.