Economic Reforms of the Banking Sector In India

Indian banking sector has undergone major changes and reforms during economic reforms. Though it was a part of overall economic reforms, it has changed the very functioning of Indian banks. This reform have not only influenced the productivity and efficiency of many of the Indian Banks, but has left everlasting footprints on the working of the banking sector in India.



Let us get acquainted with some of the important reforms in the banking sector in India.

1. Reduced CRR and SLR : The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are gradually reduced during the economic reforms period in India. By Law in India the CRR remains between 3-15% of the Net Demand and Time Liabilities. It is reduced from the earlier high level of 15% plus incremental CRR of 10% to current 4% level. Similarly, the SLR Is also reduced from early 38.5% to current minimum of 25% level. This has left more loanable funds with commercial banks, solving the liquidity problem.
2. Deregulation of Interest Rate : During the economics reforms period, interest rates of commercial banks were deregulated. Banks now enjoy freedom of fixing the lower and upper limit of interest on deposits. Interest rate slabs are reduced from Rs.20 Lakhs to just Rs. 2 Lakhs. Interest rates on the bank loans above Rs.2 lakhs are full decontrolled. These measures have resulted in more freedom to commercial banks in interest rate regime.
3. Fixing prudential Norms : In order to induce professionalism in its operations, the RBI fixed prudential norms for commercial banks. It includes recognition of income sources. Classification of assets, provisions for bad debts, maintaining international standards in accounting practices, etc. It helped banks in reducing and restructuring Non-performing assets (NPAs).
4. Introduction of CRAR : Capital to Risk Weighted Asset Ratio (CRAR) was introduced in 1992. It resulted in an improvement in the capital position of commercial banks, all most all the banks in India has reached the Capital Adequacy Ratio (CAR) above the statutory level of 9%.
5. Operational Autonomy : During the reforms period commercial banks enjoyed the operational freedom. If a bank satisfies the CAR then it gets freedom in opening new branches, upgrading the extension counters, closing down existing branches and they get liberal lending norms.
6. Banking Diversification : The Indian banking sector was well diversified, during the economic reforms period. Many of the banks have stared new services and new products. Some of them have established subsidiaries in merchant banking, mutual funds, insurance, venture capital, etc which has led to diversified sources of income of them.
7. New Generation Banks : During the reforms period many new generation banks have successfully emerged on the financial horizon. Banks such as ICICI Bank, HDFC Bank, UTI Bank have given a big challenge to the public sector banks leading to a greater degree of competition.
8. Improved Profitability and Efficiency : During the reform period, the productivity and efficiency of many commercial banks has improved. It has happened due to the reduced Non-performing loans, increased use of technology, more computerization and some other relevant measures adopted by the government.

These are some of the import reforms regarding the banking sector in India.
With these reforms, Indian banks especially the public sector banks have proved that they are no longer inefficient compared with their foreign counterparts as far as productivity is concerned.

Recent Developments in Capital Market of India

The Indian capital market has witnessed major reforms in the decade of 1990s and there after. It is on the verge of the growth.
Thus, the Government of India and SEBI has taken a number of measures in order to improve the working of the Indian stock exchanges and to make it more progressive and vibrant.
Reforms in Capital Market of India


The major reforms undertaken in capital market of India includes:-

1. Establishment of SEBI : The Securities and Exchange Board of India (SEBI) was established in 1988. It got a legal status in 1992. SEBI was primarily set up to regulate the activities of the merchant banks, to control the operations of mutual funds, to work as a promoter of the stock exchange activities and to act as a regulatory authority of new issue activities of companies. The SEBI was set up with the fundamental objective, "to protect the interest of investors in securities market and for matters connected therewith or incidental thereto."
   The main functions of SEBI are:-
   1. To regulate the business of the stock market and other securities market.
   2. To promote and regulate the self regulatory organizations.
   3. To prohibit fraudulent and unfair trade practices in securities market.
   4. To promote awareness among investors and training of intermediaries about safety of market.
   5. To prohibit insider trading in securities market.
   6. To regulate huge acquisition of shares and takeover of companies.
2. Establishment of Creditors Rating Agencies : Three creditors rating agencies viz. The Credit Rating Information Services of India Limited (CRISIL - 1988), the Investment Information and Credit Rating Agency of India Limited (ICRA - 1991) and Credit Analysis and Research Limited (CARE) were set up in order to assess the financial health of different financial institutions and agencies related to the stock market activities. It is a guide for the investors also in evaluating the risk of their investments.
3. Increasing of Merchant Banking Activities : Many Indian and foreign commercial banks have set up their merchant banking divisions in the last few years. These divisions provide financial services such as underwriting facilities, issue organising, consultancy services, etc. It has proved as a helping hand to factors related to the capital market.
4. Candid Performance of Indian Economy : In the last few years, Indian economy is growing at a good speed. It has attracted a huge inflow of Foreign Institutional Investments (FII). The massive entry of FIIs in the Indian capital market has given good appreciation for the Indian investors in recent times. Similarly many new companies are emerging on the horizon of the Indian capital market to raise capital for their expansions.
5. Rising Electronic Transactions : Due to technological development in the last few years. The physical transaction with more paper work is reduced. Now paperless transactions are increasing at a rapid rate. It saves money, time and energy of investors. Thus it has made investing safer and hassle free encouraging more people to join the capital market.
6. Growing Mutual Fund Industry : The growing of mutual funds in India has certainly helped the capital market to grow. Public sector banks, foreign banks, financial institutions and joint mutual funds between the Indian and foreign firms have launched many new funds. A big diversification in terms of schemes, maturity, etc. has taken place in mutual funds in India. It has given a wide choice for the common investors to enter the capital market.
7. Growing Stock Exchanges : The numbers of various Stock Exchanges in India are increasing. Initially theBSE was the main exchange, but now after the setting up of the NSE and the OTCEI, stock exchanges have spread across the country. Recently a new Inter-connected Stock Exchange of India has joined the existing stock exchanges.
8. Investor's Protection : Under the purview of the SEBI the Central Government of India has set up the Investors Education and Protection Fund (IEPF) in 2001. It works in educating and guiding investors. It tries to protect the interest of the small investors from frauds and malpractices in the capital market.
9. Growth of Derivative Transactions : Since June 2000, the NSE has introduced the derivatives trading in the equities. In November 2001 it also introduced the future and options transactions. These innovative products have given variety for the investment leading to the expansion of the capital market.
10. Insurance Sector Reforms : Indian insurance sector has also witnessed massive reforms in last few years. The Insurance Regulatory and Development Authority (IRDA) was set up in 2000. It paved the entry of the private insurance firms in India. As many insurance companies invest their money in the capital market, it has expanded.
11. Commodity Trading : Along with the trading of ordinary securities, the trading in commodities is also recently encouraged. The Multi Commodity Exchange (MCX) is set up. The volume of such transactions is growing at a splendid rate.

Apart from these reforms the setting up of Clearing Corporation of India Limited (CCIL), Venture Funds, etc., have resulted into the tremendous growth of Indian capital market

INTRODUCTION

THE STRUCTURE OF AN ITS SYSTEM

USE IN PRACTICE

• Continue to study this report. Make notes and add anything it might be missing. (If you see that it is missing something, please inform me!)
• Acquire and study the following books: Cognitive Therapy and the Emotional Disorders, Freeze-Frame, Multimind, and The Path of Least Resistance. I consider these required reading. The other books listed in the bibliography section of this report are optional.
• Consider keeping a daily journal tracking your emotional states. You could also include the following: automatic thoughts, command phrases and mood contagion. Journaling is also a good tool for flushing out emotional garbage; when you write about your negative feelings and moods, you externalize them.
• Begin implementing the ideas in this report and the books listed above.
• Begin ridding yourself of your command phrases — the destructive unconscious programs installed in your brain during moments of emotional upset. Read the books by Wetherill listed in the bibliography.
• Begin monitoring your automatic thoughts.
• Observe the identification process in yourself, especially when you identify with your negative emotions.
• Start monitoring yourself for mood contagion.
• Begin practicing the freeze-frame technique.
• Use the Callahan Techniques (Thought Field Therapy) to take care of any psychological problems you may have, such as phobias, addictions or depression. To find out about Dr. Callahan’s books and tapes, visit his website. I (Mark Lindsay) am a certified practitioner of Thought Field Therapy. You are welcome to contact me if you have any questions regarding the Callahan Techniques or would like TFT treatment.
• Learn more about Idenics and consider undergoing a few sessions. Contact Mike Goldstein at 1-800-IDENICS.
• Continue to strengthen and expand your self-control and personal freedom.

Whatever the reasons, we do not pursue emotional development with the same intensity with which we pursue physical and intellectual development. This is all the more unfortunate because full emotional development offers the greatest degree of leverage in attaining our full potential" [my emphasis].
It is the idea of emotional development as providing the greatest leverage in actualizing our full potential which strikes me as being of great significance. For, most all adult humans are quite immature when it comes to their emotions. It’s as if, emotionally speaking, they stopped growing at about the age of ten or eleven. And some of us have not even reached that far. I say this in all seriousness. The vast majority of us are grossly immature when it comes to our emotions.
And if that is indeed the case, then how can we expect to attain our full potential to any significant degree? At most we could expect a lop-sided development: for example, we may have acquired advanced thinking skills yet remain an emotional child.
It is clear that part of the task of the Personal Power Institute needs to be to teach people how to continue developing their emotional maturity.

INTRODUCTION

USING THE  SYSTEMS APPROACH IN PRACTICE

         The systems approach to course and curriculum design is no more than an attempt to use a process of logical development and on-going monitoring and evaluation in order to allow continuous evaluation of the course or curriculum to take place. It is, however, worth adding some cautionary remarks about using the systems approach in practice. In implementing the systems approach, it is important to appreciate that, while the decisions taken at each stage are always affected by earlier decisions, they may themselves necessitate some of these earlier decisions being changed. It is also important to realise that the stages shown are not the only ones possible, and that, once taken, a decision can always be reconsidered. The approach should thus be dynamic and iterative, always allowing for second thoughts and the refinement of ideas. For example, although you should certainly make a first attempt to define objectives and learning outcomes very early in the planning, you will invariably need to come back to re-define or add to them once you have worked through some of the later steps.
         The systems approach can be used at any time when a episode of teaching/learning of any length is being planned. It can be applied to long-term planning for a whole course lasting weeks, months or years, through to daily lesson planning, or even to on-the-spot planning for a learning experience of only a few seconds' duration. It can be applied by a group of teachers designing or adapting a complete course, as well as by an individual teacher preparing his or her specific course input. The approach can also be used for analysing a previous teaching/learning experience. The systems approach does not prescribe or promote any particular teaching methodology (eg individualised study, or group learning). Rather, it is a vehicle that helps teachers to think more systematically and logically about the objectives relevant to their students and the means of achieving and assessing these. On occasion, analysis may suggest that 'chalk and talk' may be the most appropriate method for achieving some objectives, but no one method will be appropriate for all objectives or for all students. Later booklets will provide detailed guidance on how such analysis can be carried out, thus enabling you to make effective use of the systems approach in planning your work as a teacher.