indian banking and economy

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INTRODUCTION A bank is an institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and make loans or make an investment to derive a profit from the difference in the interest rates paid and charged, respectively. In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. India’s economy has been one of the stars of global economics in recent years. It has grown by more than 9% for three years running. The economy of India is as diverse as it is large, with a number of major sectors including manufacturing industries, agriculture, textiles and 1

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Page 1: Indian Banking and Economy

INTRODUCTION

A bank is an institution that deals in money and its substitutes and

provides other financial services. Banks accept deposits and make loans

or make an investment to derive a profit from the difference in the

interest rates paid and charged, respectively.

In India the banks are being segregated in different groups. Each

group has their own benefits and limitations in operating in India. Each

has their own dedicated target market. Few of them only work in rural

sector while others in both rural as well as urban. Many even are only

catering in cities. Some are of Indian origin and some are foreign players.

India’s economy has been one of the stars of global economics in

recent years. It has grown by more than 9% for three years running. The

economy of India is as diverse as it is large, with a number of major

sectors including manufacturing industries, agriculture, textiles and

handicrafts, and services. Agriculture is a major component of the Indian

economy, as over 66% of the Indian population earns its livelihood from

this area. Banking sector is considered as a booming sector in Indian

economy recently. Banking is a vital system for developing economy for

the nation.

However, Indian banking system and economy has been facing

various challenges and problems which have discussed in other parts of

project.

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INDIAN BANKING SYSTEM

Without a sound and effective banking system in India it cannot

have a healthy economy. The banking system of India should not only be

hassle free but it should be able to meet new challenges posed by the

technology and any other external and internal factors. For the past three

decades India's banking system has several outstanding achievements to

its credit. The most striking is its extensive reach. It is no longer confined

to only metropolitans or cosmopolitans in India. In fact, Indian banking

system has reached even to the remote corners of the country. This is one

of the main reasons of India's growth process. The government's regular

policy for Indian bank since 1969 has paid rich dividends with the

nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank

counters for getting a draft or for withdrawing his own money. Today, he

has a choice. Gone are days when the most efficient bank transferred

money from one branch to other in two days. Now it is simple as instant

messaging or dial a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in

1786. From 1786 till today, the journey of Indian Banking System can be

segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian

banking sector Reforms.

New phase of Indian Banking System with the advent of Indian

Financial & Banking Sector Reforms after 1991.

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After 1991, under the chairmanship of M Narasimham, a

committee was set up by his name which worked for the liberalization of

banking practices. The country is flooded with foreign banks and their

ATM stations. Efforts are being put to give a satisfactory service to

customers. Phone banking and net banking is introduced. The entire

system became more convenient and swift. Time is given more

importance than money. This resulted that Indian banking is growing at

an astonishing rate, with Assets expected to reach US$1 trillion by 2010.

“The banking industry should focus on having a small number of

large players that can compete globally and can achieve expected goals

rather than having a large number of fragmented players."

KINDS OF BANKS

Financial requirements in a modern economy are of a diverse

nature, distinctive variety and large magnitude. Hence, different types of

banks have been instituted to cater to the varying needs of the

community. Banks in the organized sector may, however, be classified in

to the following major forms:

o Commercial banks

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o Co-operative banks

o Specialized banks

o Central bank

COMMERCIAL BANKS

Commercial banks are joint stock companies dealing in money and

credit. In India, however there is a mixed banking system, prior to July

1969, all the commercial banks-73 scheduled and 26 non-scheduled

banks, except the state bank of India and its subsidiaries-were under the

control of private sector. On July 19, 1969, however, 14 major

commercial banks with deposits of over 50 Corers were nationalized. In

April 1980, another six commercial banks of high standing were taken

over by the government.

At present, there are 20 nationalized banks plus the state bank of

India and its 7 subsidiaries constituting public sector banking which

controls over 90 per cent of the banking business in the country.

CO-OPERATIVE BANKS

Co-operative banks are a group of financial institutions organized

under the provisions of the Co-operative societies Act of the states. The

main objective of co-operative banks is to provide cheap credits to their

members. They are based on the principle of self-reliance and mutual co-

operation. Co-operative banking system in India has the shape of a

pyramid a three tier structure, constituted by:

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SPECIALIZED BANKS

There are specialized forms of banks catering to some special

needs with this unique nature of activities. There are thus,

o Foreign exchange banks,

o Industrial banks,

o Development banks,

o Land development banks,

o Exim bank.

CENTRAL BANK

A central bank is the apex financial institution in the banking and

financial system of a country. It is regarded as the highest monetary

authority in the country. It acts as the leader of the money market. It

supervises, control and regulates the activities of the commercial banks. It

is a service oriented financial institution.

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India’s central bank is the Reserve Bank of India established in

1935. A central bank is usually state owned but it may also be a private

organization. For instance, the Reserve Bank of India (RBI), was started

as a shareholders’ organization in 1935, however, it was nationalized

after independence, in 1949. It is free from parliamentary control.

CHALLENGES FACED BY INDIAN BANKING INDUSTRY

The banking industry in India is undergoing a major transformation

due to changes in economic conditions and continuous deregulation.

These multiple changes happening one after other has a ripple effect on a

bank trying to graduate from completely regulated sellers market to

completed deregulated customers market.

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o DEREGULATION

This continuous deregulation has made the Banking market

extremely competitive with greater autonomy, operational flexibility, and

decontrolled interest rate and liberalized norms for foreign exchange. The

deregulation of the industry coupled with decontrol in interest rates has

led to entry of a number of players in the banking industry. At the same

time reduced corporate credit off take thanks to sluggish economy has

resulted in large number of competitors battling for the same pie.

o NEW RULES

As a result, the market place has been redefined with new rules of

the game. Banks are transforming to universal banking, adding new

channels with lucrative pricing and freebees to offer. Natural fall out of

this has led to a series of innovative product offerings catering to various

customer segments, specifically retail credit.

o EFFICIENCY

This in turn has made it necessary to look for efficiencies in the

business. Banks need to access low cost funds and simultaneously

improve the efficiency. The banks are facing pricing pressure, squeeze on

spread and have to give thrust on retail assets.

o DIFFUSED CUSTOMER LOYALTY

This will definitely impact Customer preferences, as they are

bound to react to the value added offerings. Customers have become

demanding and the loyalties are diffused. There are multiple choices; the

wallet share is reduced per bank with demand on flexibility and

customization. Given the relatively low switching costs; customer

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retention calls for customized service and hassle free, flawless service

delivery.

o MISALLIGNED MINDSET

These changes are creating challenges, as employees are made to

adapt to changing conditions. There is resistance to change from

employees and the Seller market mindset is yet to be changed coupled

with Fear of uncertainty and Control orientation. Acceptance of

technology is slowly creeping in but the utilization is not maximized.

o COMPETENCE GAP

Placing the right skill at the right place will determine success. The

competency gap needs to be addressed simultaneously otherwise there

will be missed opportunities. The focus of people will be on doing work

but not providing solutions, on escalating problems rather than solving

them and on disposing customers instead of using the opportunity to cross

sell.

STRATEGIES OPTIONS WITH BANKS TO COPE WITH THOSE CHALLENGES

Leading players in the industry have embarked on a series of

strategic and tactical initiatives to sustain leadership. The major

initiatives include:

o Investing in state of the art technology as the back bone of to

ensure reliable service delivery

o Leveraging the branch network and sales structure to

mobilize low cost current and savings deposits

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o Making aggressive forays in the retail advances segment of

home and personal loans

o Implementing organization wide initiatives involving people,

process and technology to reduce the fixed costs and the cost

per transaction

o Focusing on fee based income to compensate for squeezed

spread, (e.g. CMS, trade services)

o Innovating Products to capture customer ‘mind share’ to

begin with and later the wallet share

o Improving the asset quality as per Basel II norms

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INDIAN ECONOMY

The Indian Economy is consistently posting robust growth

numbers in all sectors leading to impressive growth in Indian GDP. The

Indian economy has been stable and reliable in recent times, while in the

last few years it’s experienced a positive upward growth trend.

A consistent 8-9% growth rate has been supported by a number of

favorable economic indicators including a huge inflow of foreign funds,

growing reserves in the foreign exchange sector, both an IT and real

estate boom, and a flourishing capital market. All of these positive

changes have resulted in establishing the Indian economy as one of the

largest and fastest growing in the world.

The process of globalization has been an integral part of the recent

economic progress made by India. Globalization has played a major role

in export-led growth, leading to the enlargement of the job market in

India.

As a new Indian middle class has developed around the wealth that

the IT and BPO industries have brought to the country, a new consumer

base has developed. International companies are also expanding their

operations in India to service this massive growth opportunity. The same

thing has followed by international banks that are entering in Indian

market and pulling their huge investments in Indian economy. This is

helping to accelerate the growth of Indian economy.

Economy can be studied from two points of views…

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MICRO ECONOMIC POINT OF VIEW

The branch of economics that analyzes the market behavior of

individual consumers and firms in an attempt to understand the decision-

making process of firms and households. It is concerned with the

interaction between individual buyers and sellers and the factors that

influence the choices made by buyers and sellers. In particular,

microeconomics focuses on patterns of supply and demand and the

determination of price and output in individual markets. Microeconomics

looks at the smaller picture and focuses more on basic theories of supply

and demand and how individual businesses decide how much of

something to produce and how much to charge for it.

MACRO ECONOMIC POINT OF VIEW

It is a field of economics that studies the behavior of the aggregate

economy. Macroeconomics examines economy-wide phenomena such as

changes in unemployment, national income, rate of growth, gross

domestic product, inflation and price levels. Macroeconomics looks at the

big picture (hence "macro"). It focuses on the national economy as a

whole and provides a basic knowledge of how things work in the business

world. For example, people who study this branch of economics would be

able to interpret the latest Gross Domestic Product figures or explain why

a 6% rate of unemployment is not necessarily a bad thing.

Thus, for an overall perspective of how the entire economy works,

you need to have an understanding of economics at both the micro and

macro levels.

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ECONOMIC SYSTEMS

An economic system is loosely defined as country’s plan for its

services, goods produced, and the exact way in which its economic plan

is carried out. In general, there are three major types of economic systems

prevailing around the world they are...

o Market Economy

o Planned Economy

o Mixed Economy

MARKET ECONOMY

In a market economy, national and state governments play a minor

role. Instead, consumers and their buying decisions drive the economy. In

this type of economic system, the assumptions of the market play a major

role in deciding the right path for a country’s economic development.

Market economies aim to reduce or eliminate entirely subsidies for a

particular industry, the pre-determination of prices for different

commodities, and the amount of regulation controlling different industrial

sectors. The absence of central planning is one of the major features of

this economic system. Market decisions are mainly dominated by supply

and demand. The role of the government in a market economy is to

simply make sure that the market is stable enough to carry out its

economic activities properly.

PLANNED ECONOMY

A planned economy is also sometimes called a command economy.

The most important aspect of this type of economy is that all major

decisions related to the production, distribution, commodity and service

prices, are all made by the government. The planned economy is

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government directed, and market forces have very little say in such an

economy. This type of economy lacks the kind of flexibility that is

present a market economy, and because of this, the planned economy

reacts slower to changes in consumer needs and fluctuating patterns of

supply and demand. On the other hand, a planned economy aims at using

all available resources for developing production instead of allotting the

resources for advertising or marketing.

MIXED ECONOMY

A mixed economy combines elements of both the planned and the

market economies in one cohesive system. This means that certain

features from both market and planned economic systems are taken to

form this type of economy. This system prevails in many countries where

neither the government nor the business entities control the economic

activities of that country – both sectors play an important role in the

economic decision-making of the country. In a mixed economy there is

flexibility in some areas and government control in others. Mixed

economies include both capitalist and socialist economic policies and

often arise in societies that seek to balance a wide range of political and

economic views.

IMPORTANT BANKING AND ECONOMIC INDICATORS

CASH RESERVE RATIO

Cash reserve Ratio (CRR) is the amount of funds that the banks

have to keep with RBI. If RBI decides to increase the percent of this, the

available amount with the banks comes down. RBI is using this method

(increase of CRR rate), to drain out the excessive money from the banks.

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The amount of which shall not be less than three per cent of the total of

the Net Demand and Time Liabilities (NDTL) in India, on a fortnightly

basis and RBI is empowered to increase the said rate of CRR to such

higher rate not exceeding twenty percent of the Net Demand and Time

Liabilities (NDTL) under the RBI Act, 1934.

STATUTORY LIQUIDITY RATIO

In terms of Section 24 (2-A) of the B.R. Act, 1949 all Scheduled

Commercial Banks, in addition to the average daily balance which they

are required to maintain in the form of….

o In cash,

Or

o In gold valued at a price not exceeding the current market

price,

Or

o In unencumbered approved securities valued at a price as

specified by the RBI from time to time.

REPO RATE

Repo rate, also known as the official bank rate, is the discounted

rate at which a central bank repurchases government securities. The

central bank makes this transaction with commercial banks to reduce

some of the short-term liquidity in the system. The repo rate is dependent

on the level of money supply that the bank chooses to fix in the monetary

scheme of things. Repo rate is short for repurchase rate. The entity

borrowing the security is often referred to as the buyer, while the lender

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of the securities is referred to as the seller. The central bank has the

power to lower the repo rates while expanding the money supply in the

country. This enables the banks to exchange their government security

holdings for cash. In contrast, when the central bank decides to reduce the

money supply, it implements a rise in the repo rates. At times, the central

bank of the nation makes a decision regarding the money supply level and

the repo rate is determined by the market.

The securities that are being evaluated and sold are transacted at

the current market price plus any interest that has accrued. When the sale

is concluded, the securities are subsequently resold at a predetermined

price. This price is comprised of the original market price and interest,

and the pre-agreed interest rate, which is the repo rate.

BANK RATE

Bank rate is referred to the rate of interest charged by premier

banks on the loans and advances. Bank rate varies based on some defined

conditions as laid down the governing authority of the banks. Bank rates

are levied to control the money supply to and from the bank. From the

consumer's point of view, bank rate ordinarily denotes to the current rate

of interest acquired from savings certificate of Deposit. It is most

frequently used by the consumers who are concerned in mortgage

Some commonest types of bank interest rates are as follows:

o Bank rate on CD, i.e., on certificate of deposit

o Bank rate on the credit of a credit card or other kind of loan

o Bank rate on real estate loan

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INTERBANK RATE

The rate of interest charged on short-term loans made between

banks. Banks borrow and lend money in the interbank market in order to

manage liquidity and meet the requirements placed on them. The interest

rate charged depends on the availability of money in the market, on

prevailing rates and on the specific terms of the contract, such as

term length.

Banks are required to hold an adequate amount of liquid assets,

such as cash, to manage any potential withdrawals from clients. If a bank

can't meet these liquidity requirements, it will need to borrow money in

the interbank market to cover the shortfall. Some banks, on the other

hand, have excess liquid assets above and beyond the liquidity

requirements. These banks will lend money in the interbank market,

receiving interest on the assets. There is a wide range of published

interbank rates, including the LIBOR & MIBOR, which is set daily based

on the average rates on loans made within the London interbank market

& Mumbai Interbank Market.

GROSS DOMESTIC PRODUCT

The monetary value of all the finished goods and services produced

within a country's borders in a specific time period, though GDP is

usually calculated on an annual basis. It includes all of private and

public consumption, government outlays, investments and exports less

imports that occur within a defined territory.

GDP = C + G + I + NX

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Where:

"C" is equal to all private consumption, or consumer spending, in a

nation's economy.

"G" is the sum of government spending.

"I" is the sum of all the country's businesses spending on capital.

"NX" is the nation's total net exports, calculated as total exports minus

total imports. (NX = Exports - Imports)

GDP is commonly used as an indicator of the economic health of a

country, as well as to gauge a country's standard of living.

INFLATION

Inflation can be defined as a rise in the general price level and

therefore a fall in the value of money. Inflation occurs when the amount

of buying power is higher than the output of goods and services. Inflation

also occurs when the amount of money exceeds the amount of goods and

services available. As to whether the fall in the value of money will affect

the functions of money depends on the degree of the fall. Basically, refers

to an increase in the supply of currency or credit relative to the

availability of goods and services, resulting in higher prices. Therefore,

inflation can be measured in terms of percentages. The percentage

increase in the price index, as a rate per cent per unit of time, which is

usually in years. The two basic price indexes are used when measuring

inflation, the producer price index (PPI) and the consumer price index

(CPI) which is also known as the cost of living index number.

DEFLATION

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It is a condition of falling prices accompanied by a decreasing level

of employment, output and income. Deflation is just the opposite of

inflation. Deflation occurs when the total expenditure of the community

is not equal to the existing prices. Consequently, the supply of money

decreases and as a result prices fall. Deflation can also be brought about

by direct contractions in spending, either in the form of a reduction in

government spending, personal spending or investment spending.

Deflation has often had the side effect of increasing unemployment in an

economy, since the process often leads to a lower level of demand in the

economy.

DISINFLATION

When prices are falling due to anti-inflationary measures adopted

by the authorities, with no corresponding decline in the existing level of

employment, output and income, the result of this is disinflation. When

acute inflation burdens an economy, disinflation is implemented as a

cure. Disinflation is said to take place when deliberate attempts are made

to curtail expenditure of all sorts to lower prices and money incomes for

the benefit of the community.

REFLATION

Reflation is a situation of rising prices, which is deliberately

undertaken to relieve a depression. Reflation is a means of motivating the

economy to produce. This is achieved by increasing the supply of money

or in some instances reducing taxes, which is the opposite of disinflation.

Governments can use economic policies such as reducing taxes, changing

the supply of money or adjusting the interest rates; which in turn

motivates the country to increase their output. The situation is described

as semi-inflation or reflation.

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STAGFLATION

Stagflation is a stagnant economy that is combined with inflation.

Basically, when prices are increasing the economy is deceasing. Some

economists believe that there are two main reasons for stagflation. Firstly,

stagflation can occur when an economy is slowed by an unfavourable

supply, such as an increase in the price of oil in an oil importing country,

which tends to raise prices at the same time that it slows the economy by

making production less profitable. In the 1970's inflation and recession

occurred in different economies at the same time. Basically, what

happened was that there was plenty of liquidity in the system and people

were spending money as quickly as they got it because prices were going

up quickly. This gave rise to the second reason for stagflation.

FOREIGN INSTITUTIONAL INVESTMENTS

Foreign Institutional Investors (FIIs), Non-Resident Indians

(NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the

primary and secondary capital markets in India through the portfolio

investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire

shares/debentures of Indian companies through the stock exchanges in

India.

The ceiling for overall investment for FIIs is 24 per cent of the paid

up capital of the Indian company and 10 per cent for NRIs/PIOs. The

limit is 20 per cent of the paid up capital in the case of public sector

banks, including the State Bank of India.

FOREIGN EXCHANGE RESERVES

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Foreign exchange reserves (also called Forex reserves) in a strict

sense are only the foreign currency deposits held by central banks and

monetary authorities. However, the term in popular usage commonly

includes foreign exchange and gold, SDRs and IMF reserve positions.

This broader figure is more readily available, but it is more accurately

termed official reserves or international reserves. These are assets of

the central bank held in different reserve currencies, such as the dollar,

euro and yen, and used to back its liabilities, e.g. the local currency

issued, and the various bank reserves deposited with the central bank, by

the government or financial institutions.

Large reserves of foreign currency allow a government to

manipulate exchange rates - usually to stabilize the foreign exchange

rates to provide a more favorable economic environment.

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ROLE OF BANKS IN DEVELOPING OF ECONOMY

A safe and sound financial sector is a prerequisite for sustained

growth of any economy. Globalization, deregulation and advances in

information technology in recent years have brought about significant

changes in the operating environment for banks and other financial

institutions. These institutions are faced with increased competitive

pressures and changing customer demands. These, in turn, have

engendered a rapid increase in product innovations and changes in

business strategies. While these developments have enabled improvement

in the efficiency of financial institutions, they have also posed some

serious risks.

Banks play a very useful and dynamic role in the economic life of

every modern state. A study of the economic history of western country

shows that without the evolution of commercial banks in the 18th and

19th centuries, the industrial revolution would not have taken place in

Europe. The economic importance of commercial banks to developing

countries may be viewed thus:

o Promoting capital formation

o Encouraging innovation

o Monetsation

o Influence economic activity

o Facilitator of monetary policy

Above all view we can see in briefly, which are given below:

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PROMOTING CAPITAL FORMATION

A developing economy needs a high rate of capital formation to

accelerate the tempo of economic development, but the rate of capital

formation depends upon the rate of saving. Unfortunately, in

underdeveloped countries, saving is very low. Banks afford facilities for

saving and, thus encourage the habits of thrift and industry in the

community. They mobilize the ideal and dormant capital of the country

and make it available for productive purposes.

ENCOURAGING INNOVATION

Innovation is another factor responsible for economic

development. The entrepreneur in innovation is largely dependent on the

manner in which bank credit is allocated and utilized in the process of

economic growth. Bank credit enables entrepreneurs to innovate and

invest, and thus uplift economic activity and progress.

MONETSATION

Banks are the manufactures of money and they allow many to play

its role freely in the economy. Banks monetize debts and also assist the

backward subsistence sector of the rural economy by extending their

branches in to the rural areas. They must be replaced by the modern

commercial bank’s branches.

INFLUENCE ECONOMIC ACTIVITY

Banks are in a position to influence economic activity in a country

by their influence on the rate interest. They can influence the rate of

interest in the money market through its supply of funds. Banks may

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follow a cheap money policy with low interest rates which will tend to

stimulate economic activity.

FACILITATOR OF MONETARY POLICY

Thus monetary policy of a country should be conductive to

economic development. But a well-developed banking system is on

essential pre-condition to the effective implementation of monetary

policy. Under-developed countries cannot afford to ignore this fact.

A fine, an efficient and comprehensive banking system is a crucial

factor of the developmental process of economy.

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RESERVE BANK OF INDIA AS A REGULATORY INSTITUTION IN INDIAN ECONOMY

The RBI was established under the Reserve Bank of India Act,

1934 on April 1, 1935 as a private shareholders' bank but since its

nationalization in 1949, is fully owned by the Government of India. The

Preamble of the Reserve Bank describes the basic functions as 'to regulate

the issue of Bank notes and keeping of reserves with a view to securing

monetary stability in India and generally, to operate the currency and

credit system of the country to its advantage'. The twin objectives of

monetary policy in India have evolved over the years as those of

maintaining price stability and ensuring adequate flow of credit to

facilitate the growth process. The relative emphasis between the twin

objectives is modulated as per the prevailing circumstances and is

articulated in the policy statements by the Reserve Bank from time to

time. Consideration of macro-economic and financial stability is also

subsumed in the mandate. The Reserve Bank is also entrusted with the

management of foreign exchange reserves (which include gold holding

also), which are reflected in its balance sheet.

While the Reserve Bank is essentially a monetary authority, its

founding statute mandates it to be the manager of market borrowing of

the Government of India and banker to the Government.

The Reserve Bank's affairs are governed by a Central Board of

Directors, consisting of fourteen non-executive, independent directors

nominated by the Government, in addition to the Governor and up to four

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Deputy Governors. Besides, one Government official is also nominated

on the Board who participates in the Board meetings but cannot vote.

IMPORTANT FUNCTIONS PLAYED BY RESERVE BANK OF INDIA IN ECONOMY

MAIN FUNCTIONS

o MONITORY AUTHORITY

The Reserve Bank of India formulates implements and monitors

the monetary policy. Its main objective is maintaining price stability and

ensuring adequate flow of credit to productive sectors.

o REGULATOR AND SUPERVISOR OF FINANCIAL SYSTEM

Prescribes broad parameters of banking operations within which

the country’s banking and financial system functions. Their main

objective is to maintain public confidence in the system, protect

depositors’ interest and provide cost-effective banking services to the

public.

o MANAGER OF EXCHANGE CONTROL

The manager of the exchange control department manages the

Foreign Exchange Management Act, 1999. Its main objective is to

facilitate external trade and payment and promote orderly development

and maintenance of foreign exchange market in India.

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o ISSUER OF THE CURRENCY

The person who is issuer issues and exchanges or destroys

currency and coins not fit for circulation. His main objective is to give the

public adequate quantity of supplies of currency notes and coins and in

good quality.

o DEVELOPMENTAL ROLE

The reserve bank of India performs a wide range of promotional

functions to support national objectives. The promotional functions are

such as contests, coupons, maintaining good public relations, and many

more…..

o RELATED FUNCTIONS

There are also some of the relating functions to the above

mentioned main functions. They are such as Banker to the Government,

Banker to banks etc….

BANKER TO THE GOVERNMENT

It performs merchant banking function for the central and the

state governments; also acts as their banker.

BANKER TO THE BANKS

Maintains banking accounts of all scheduled banks.

SUPERVISORY FUNCTIONS

The Reserve Bank act, 1934 and the Banking Regulation act, 1949

have given the RBI wide powers of supervision and control over

commercial and co-operative banks, relating to licensing and

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establishments, branch expansion, liquidity of their asset, management

and methods of working, amalgamation, reconstruction, and liquidation.

The RBI is authorized to carry out periodical inspections of banks

and to call for returns and necessary information from them. The

supervisory functions of the RBI have helped a great deal in improving

the standard of banking in India to develop on sound lines and to improve

the methods of their operation.

PROMOTIONAL FUNCTIONS

With economic growth assuming a new urgency since

Independence, the range of the Reserve Bank’s functions has steadily

widened. The bank now performs a variety of developmental and

promotional functions, which, at one time were regarded as outside the

normal scope of central banking. The RBI was asked to promote banking

habit, extend banking facilities to rural and semi-urban areas, and

establish and promote new specialized financing agencies.

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PROBLEMS FACED BY INDIAN ECONOMY

Macro-economic environment in India has taken a serious turn

since the beginning of the year. Unprecedented rise in crude prices, surge

in inflation and continued strong growth in money supply (M3) have

forced the government and RBI to take strong fiscal and monetary

measures leading to liquidity tightening, significant rise in interest rates

and slowdown in economic growth.

Economic shocks are events which adversely affect the economy

and the government’s macroeconomic objectives such as growth,

inflation, unemployment and the balance of payments.

CERTAIN PROBLEMS FACED BY INDIAN ECONOMY

o FALL IN SAVINGS RATIO

The savings ratio is the % of income that is saved not spent. A fall

in the savings ratio implies that consumer spending is increasing; often

this is financed through increased borrowing.

EFFECTS OF FALL IN SAVINGS RATIO

HIGHER LEVEL OF CONSUMPTION

This results in increase in Aggregate Demand. The

increase in AD will cause an increase in economic growth

and lower unemployment. However, rising Aggregate

Demand may cause inflation. Inflation will occur when

growth is faster than the long run trend rate. This is now a

potential problem in the India. Inflation has recently gone

above 12%

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BOOM AND BUST

A fall in the savings ratio is usually accompanied by a

rise in confidence. It is the rise in confidence which encourages

borrowing and consumers to run down savings. Therefore, there

is always a danger that a falling savings ratio can be a precursor

to a boom and bust situation.

ECONOMY MORE SENSITIVE TO INTEREST RATES

With a fall in the savings ratio interest rate changes will

have a bigger effect in reducing spending. This is because levels

of borrowing are higher and therefore a rise in interest rates has

a significant impact on increasing interest repayments. Also,

higher rates will not be increasing incomes from savings as

much.

BALANCE OF PAYMENT

With higher levels of consumer spending, there will be an

increase in imports. Therefore this will lead to deterioration in

the current account. The current account deficit could put

downward pressure on the exchange rate in the long term.

However, some people argue a fall in the savings ratio is not a

problem, but, it is just a reflection of strong economy and booming

housing market, which increases scope for equity withdrawal.

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o INFLATION

Inflation is posing a serious challenge to the economic growth of

India. Since Jan’08 onwards, inflation in the country has surged by 8.2%

to hit a 13-year high of ~12%. M3 growth in the economy too continued

to remain strong at 20% (in July’08), well above the RBI’s comfort level

of 17%.

The WPI inflation rate flared up during the period driven by

significant increase in the prices of commodities, primary articles and

manufactured products, even though very small part of global crude price

increase has been passed on to the Indian consumers.

o GLOBAL RECESSION

It appears that Europe, Japan and the US are entering into

recession. Falling house prices, crisis in the financial system, and lower

confidence could lead to a sharp downturn, with the worst still to come.

Many argue that India’s growth is not so dependent on growth in the

West. However, the Indian stock markets have been hit by the global

crisis. India’s growing service sector and manufacturing sector would be

adversely impacted by a global downturn.

o RISE IN CRUDE PRICES

How global crude prices would behave probably has no easy

answers; however we believe that the current challenging and uncertain

macro-economic conditions does not lead Indian financials into a state of

crisis. But continued rise in crude prices and its resultant impact on

inflation, interest rates and government finances has the potential to do

so. Hence, crude price remains the key risk to our positive stance on the

Indian financials.

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In the last couple of months oil prices have surged by 45% from

US$ 100 to US$ 145 (and now back to US$ 115). India currently imports

70% of its crude requirement, resulting in pressure on government coffers

on back of rising crude prices.

o DEPRICIATING INR

Surge in crude prices has severely impacted current account deficit

of the country. This coupled with the outflow of FII investments has

resulted in INR to depreciate sharply against dollar further fueling

inflation.

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IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALS

The current macro-economic conditions are expected to result in

o SLOWDOWN IN CREDIT GROWTH

o IMPACT ON MARGINS OF BANKS

o PREASURE ON CREDIT QUALITY

SLOWDOWN IN CREDIT GROWTH

While the rise in interest rates should lead to a moderation in

demand for credit, Indian banks too are exercising caution while lending.

Credit growth of 18% in FY09E and 17% in FY10E vs. 22% in FY08.

Risks and uncertainties in the system have increased given the higher

crude and commodity prices and its inflationary impact. This would

curtail consumption, which would impact economic growth adversely.

Further higher rates will not only impact the profitability of Indian

corporate but also impact IRRs of various proposed capex projects. This

coupled with elections next year could lead to some postponement of

capex plans of corporate, leading to negative impact on demand for

credit.

Higher rates have particularly impacted retail loan growth. As can

be seen in the exhibit below, retail loan growth has slowed down

significantly from 26.5% in FY07 to ~13% in FY08. SLR Ratio of the

system has started rising since mid FY08 and currently stands at 28.7%.

Given the expected negative impact on credit growth.

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IMPACT ON MARGINS OF BANKS

During the past 18 months, CRR has increased by 400 bps to 9.0%

currently and RBI has also discontinued with interest payment on CRR

balances. Every 50 bps hike in CRR generally negatively impacts

margins by ~5 bps. Till June’08, most of the banks had restrained from

hiking lending rates despite significant monetary tightening. However on

account of recent measures by RBI, banks have resorted to hiking PLRs

in July/August by 50-150 bps to preserve their margins.

In fact in an environment, where liquidity is tight, interest rates are

at elevated levels and risk premiums have increased, the banks tend to

regain the pricing power. This would not only help the banks to

adequately price in risks but also help protect their margins. Apart from

hiking PLRs, banks are also resorting to reprising (in fact right-pricing)

the loans that were sanctioned well below PLRs. Significant portion of

fixed rate loans would also get re-priced over the period of 12-18 months.

PRESSURE ON CREDIT QUALITY

Higher lending rates are expected to impact credit quality for the

banking system. The extent of the impact on credit quality would also be

bank specific given the loan mix (retail vs. corporate), proportion of

unsecured lending, credit profile of corporate loan book and industry wise

exposure. Indian banks’ fundamentals are relatively resilient with better

risk management systems, dramatically improved asset quality, stronger

recovery mechanisms (legal provisions) and with adequate capitalization

and provisioning.

Even Certain sectors (like real estate, airlines industry) might feel

the stress due to the changing macro environment and rise in interest

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rates. Many companies where crude forms a key raw material component

are expected to get hit more severely. Similarly, sectors like real estate

and SMEs, which are interest rate sensitive, would face higher

delinquencies if interest rates strengthen further by 100-200 bps.

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NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO TACKLE ECONOMIC PROBLEMS

As most of economists feel that the most horrible problem which

India is facing currently is inflation which has crossed 12%. To come out

of these problems RBI and ministry of finance and other relevant

government and regulatory entities are taking various initiatives which

are as follows...

RBI MONITORY POLICY

With the introduction of the Five year plans, the need for

appropriate adjustment in monetary and fiscal policies to suit the pace

and pattern of planned development became imperative. The monitory

policy since 1952 emphasized the twin aims of the economic policy of

the government:

o Spread up economic development in the country to raise national

income and standard of living, and

o To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly

as one of controlled expansion, i.e.; a policy of “adequate financing of

economic growth and at the same time the time ensuring reasonable price

stability”. Expansion of currency and credit was essential to meet the

increased demand for investment funds in an economy like India which

had embarked on rapid economic development. Accordingly, RBI helped

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the economy to expand via expansion of money and credit and attempted

to check in rise in prices by the use of selective controls.

OBJECTIVES OF MONITORY POLICY

PRICE STABILITY

MONITORY TARGETTING

INTEREST RATE POLICY

RESTRUCTURING OF MONEY MARKET

REGULATION OF FOREIGN EXCHANGE MARKET

WEAPONS OF MONITORY POLICY

Central banks generally use the three quantitative measures to

control the volume of credit in an economy, namely:

o Raising bank rates

o Open market operations and

o Variable reserve ratio

However, there are various limitations on the effective working of

the quantitative measures of credit control adapted by the central banks

and, to that extent, monetary measures to control inflation are weakened.

In fact, in controlling inflation moderate monetary measures, by

themselves, are relatively ineffective. On the other hand, drastic monetary

measures are not good for the economic system because they may easily

send the economy into a decline.

In a developing economy there is always an increasing need for

credit. Growth requires credit expansion but to check inflation, there is

need to contract credit. In such a encounter, the best course is to resort to

credit control, restricting the flow of credit into the unproductive,

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inflation-infected sectors and speculative activities, and diversifying the

flow of credit towards the most desirable needs of productive and growth-

inducing sector. It should be noted that the impression that the rate of

spending can be controlled rigorously by the contraction of credit or

money supply is wrong in the context of modern economic societies. In

modern community, tangible, wealth is typically represented by claims in

the form of securities, bonds, etc., or near moneys, as they are called.

Such near moneys are highly liquid assets, and they are very close to

being money. They increase the general liquidity of the economy. In

these circumstances, it is not so simple to control the rate of spending or

total outlays merely by controlling the quantity of money. Thus, there is

no immediate and direct relationship between money supply and the price

level, as is normally conceived by the traditional quantity theories. When

there is inflation in an economy, monetary restraints can, in conjunction

with other measures, play a useful role in controlling inflation.

FISCAL POLICY

Fiscal policy is another type of budgetary policy in relation to

taxation, public borrowing, and public expenditure. To curve the effects

of inflation and changes in the total expenditure, fiscal measures would

have to be implemented which involves an increase in taxation and

decrease in government spending. During inflationary periods the

government is supposed to counteract an increase in private spending. It

can be cleared noted that during a period of full employment inflation, the

aggregate demand in relation to the limited supply of goods and services

is reduced to the extent that government expenditures are shortened.

Along with public expenditure, governments must simultaneously

increase taxes that would effectively reduce private expenditure, in an

effect to minimise inflationary pressures. It is known that when more

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taxes are imposed, the size of the disposable income diminishes, also the

magnitude of the inflationary gap in regards to the availability of the

supply of goods and services. In some instances, tax policy has been

directed towards restricting demand without restricting level of

production. For example, excise duties or sales tax on various

commodities may take away the buying power from the consumer goods

market without discouraging the level of production. However, some

economists point out that this is not a correct way of combating inflation

because it may lead to a regressive status within the economy.

As a result, this may lead to a further rise in prices of goods and

services, and inflation can spread from one sector of the economy to

another and from one type of goods and services to another. Therefore, a

reduction in public expenditure, and an increase in taxes produces a cash

surplus in the budget. Keynes, however, suggested a programme of

compulsory savings, such as deferred pay as an anti-inflationary measure.

Deferred pay indicates that the consumer defers a part of his or her wages

by buying savings bonds (which, of course, is a sort of public borrowing),

which are redeemable after a particular period of time, this is sometimes

called forced savings. Additionally, private savings have a strong

disinflationary effect on the economy and an increase in these is an

important measure for controlling inflation. Government policy should

therefore, include devices for increasing savings. A strong savings drive

reduces the spendable income of the consumers, without any harmful

effects of any kind that are associated with higher taxation. Furthermore,

the effects of a large deficit budget, which is mainly responsible for

inflation, can be partially offset by covering the deficit through public

borrowings. It should be noted that it is only government borrowing from

non-bank lenders that has a disinflationary effect. In addition, public debt

may be managed in such a way that the supply of money in the country

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may be controlled. The government should avoid paying back any of its

past loans during inflationary periods, in order to prevent an increase in

the circulation of money. Anti-inflationary debt management also

includes cancellation of public debt held by the central bank out of a

budgetary surplus.

Fiscal policy by itself may not be very effective in combating

inflation; therefore a combination of fiscal and monetary tools can work

together in achieving the desired outcome.

DIRECT MEASURES

Direct controls refer to the regulatory measures undertaken to

convert an open inflation into a repressed one. Such regulatory measures

involve the use of direct control on prices and rationing of scarce goods.

The function of price control is a fix a legal ceiling, beyond which prices

of particular goods may not increase. When ceiling prices are fixed and

enforced, it means prices are not allowed to rise further and so, inflation

is suppressed. Under price control, producers cannot raise the price

beyond a specified level, even though there may be a pressure of

excessive demand forcing it up.

In times of the severe scarcity of certain goods, particularly, food

grains, government may have to enforce rationing, along with price

control. The main function of rationing is to divert consumption from

those commodities whose supply needs to be restricted for some special

reasons; such as, to make the commodity more available to a larger

number of households. Therefore, rationing becomes essential when

necessities, such as food grains, are relatively scarce. Rationing has the

effect of limiting the variety of quantity of goods available for the good

cause of price stability and distributive impartiality.

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Another control measure that was suggested is the control of wages

as it often becomes necessary in order to stop a wage-price spiral. During

galloping inflation, it may be necessary to apply a wage-profit freeze.

Ceilings on wages and profits keep down disposable income and,

therefore the total effective demand for goods and services. On the other

hand, restrictions on imports may also help to increase supplies of

essential commodities and ease the inflationary pressure. However, this is

possible only to a limited extent, depending upon the balance of

payments situation. Similarly, exports may also be reduced in an effort to

increase the availability of the domestic supply of essential commodities

so that inflation is eased.

In general, monetary and fiscal controls may be used to repress

excess demand but direct controls can be more useful when they are

applied to specific scarcity areas. As a result, anti-inflationary policies

should involve varied programmes and cannot exclusively depend on a

particular type of measure only.

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RECENT INNOVATIONS IN INDIAN BANKING

HDFC Bank’s ‘Net Safe’ card is a one-time use card with a limit

that’s specified, taken from Tendon’s credit or debit card. Even if Tandon

fails to utilize the full amount within 24 hours of creating the card, the

card simply dies and the unspent amount in the temporary card reverts to

his original credit or debit card. Welcome to one of the myriad ways in

which bankers have been trying to innovate. They’re bringing ATMs,

cash and even foreign exchange to their customers’ doorsteps. Indeed,

innovation has become the hottest banking game in town.

Want to buy a house but don’t want to go through the hassles of

haggling with brokers and the mounds of paperwork? Not to worry. Your

bank will tackle all this. It’s ready to come every step of the way for you

to buy a house. Standard Chartered, for instance, has property advisors to

guide a customer through the entire process of selecting and buying a

house. They also lend a hand with the cumbersome documentation

formalities and the registration.

Don’t fret if you’ve already bought your house or car – you can do

other things with both. You can leverage your new house or car these

days with banks like ICICI Bank and Stanchart ready to extend loans

against either, till it’s about five years old. Loans are available to all car

owners for almost all brands of cars manufactured in India that are up to

five years old.

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Last month, Kotak Mahindra Bank introduced a variant of the

sweep-in account. If the balance tops Rs 1.5 lakh, the excess runs into

Kotak’s liquid mutual fund. “Even if the money is there only for the

weekend, a liquid fund can earn you a clean 4.5 per cent per annum,”

points out Shashi Arora, vice president, marketing, Kotak Mahindra

Bank. That’s not a small gain considering that your current account does

not pay you any interest. And if, meanwhile, you want to buy a big-ticket

home theatre system, the minute you swipe your card the invested sum

will return to your account.

Banks are also attempting to reach out to residents of metropolitan

cities where people are pressed for time (what with long commuting

hours, traffic jams and both spouses working), beyond conventional

banking hours. ICICI Bank, for example, introduced eight to eight

banking hours, seven days of the week, in major cities. Not to be outdone,

some of the other private banks have also done this too. HDFC Bank even

has a 24-hour branch at Mumbai’s international airport.

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INDIAN BANKING IN 2010

The interplay between policy and regulatory interventions and

management strategies will determine the performance of Indian banking

over the next few years. Legislative actions will shape the regulatory

stance through six key elements: industry structure and sector

consolidation; freedom to deploy capital; regulatory coverage; corporate

governance; labor reforms and human capital development; and support

for creating industry utilities and service bureaus. Management success

will be determined on three fronts: fundamentally upgrading

organizational capability to stay in tune with the changing market;

adopting value-creating M&A as an avenue for growth; and continually

innovating to develop new business models to access untapped

opportunities.

Through these scenarios, we can paint a picture of the events and

outcomes that will be the consequence of the actions of policy makers

and bank managements. These actions will have dramatically different

outcomes; the costs of inaction or insufficient action will be high.

Specifically, at one extreme, the sector could account for over 7.7 per

cent of GDP with over Rs.. 7,500 billion in market cap, while at the other

it could account for just 3.3 per cent of GDP with a market cap of Rs.

2,400 billion. Banking sector intermediation, as measured by total loans

as a percentage of GDP, could grow marginally from its current levels of

~30 per cent to ~45 per cent or grow significantly to over 100 per cent of

GDP. In all of this, the sector could generate employment to the tune of

1.5 million compared to 0.9 million. Today availability of capital would

be a key factor — the banking sector will require as much as Rs. 600

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billion (US$ 14 billion) in capital to fund growth in advances, non-

performing loan (NPL) write offs and investments in IT and human

capital up gradation to reach the high-performing scenario. Three

scenarios can be defined to characterize these outcomes:

o HIGH PERFORMANCE

In this scenario, policy makers intervene only to the extent required

to ensure system stability and protection of consumer interests, leaving

managements free to drive far reaching changes. Changes in regulations

and bank capabilities reduce intermediation costs leading to increased

growth, innovation and productivity. Banking becomes an even greater

driver of GDP growth and employment and large sections of the

population gain access to quality banking products. Management is able

to overhaul bank organizational structures, focus on industry

consolidation and transform the banks into industry shapers.

In this scenario we witness consolidation within public sector

banks (PSBs) and within private sector banks. Foreign banks begin to be

active in M&A, buying out some old private and newer private banks.

Some M&A activity also begins to take place between private and public

sector banks. As a result, foreign and new private banks grow at rates of

50 per cent, while PSBs improve their growth rate to 15 per cent. The

share of the private sector banks (including through mergers with PSBs)

increases to 35 per cent and that of foreign banks increases to 20 per cent

of total sector assets. The share of banking sector value adds in GDP

increases to over 7.7 per cent, from current levels of 2.5 per cent. Funding

this dramatic growth will require as much as Rs. 600 billion in capital

over the next few years.

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o EVOLUTION

Policy makers adopt a pro-market stance but are cautious in

liberalizing the industry. As a result of this, some constraints still exist.

Processes to create highly efficient organizations have been initiated but

most banks are still not best-in-class operators. Thus, while the sector

emerges as an important driver of the economy and wealth in 2010, it has

still not come of age in comparison to developed markets. Significant

changes are still required in policy and regulation and in capability-

building measures, especially by public sector and old private sector

banks.

In this scenario, M&A activity is driven primarily by new private

banks, which take over some old private banks and also merge among

themselves. As a result, growth of these banks increases to 35 per cent.

Foreign banks also grow faster at 30 per cent due to a relaxation of some

regulations. The share of private sector banks increases to 30 per cent of

total sector assets, from current levels of 18 per cent, while that of foreign

banks increases to over 12 per cent of total assets. The share of banking

sector value adds to GDP increases to over 4.7 per cent.

o STAGNATION

In this scenario, policy makers intervene to set restrictive

conditions and management is unable to execute the changes needed to

enhance returns to shareholders and provide quality products and services

to customers. As a result, growth and productivity levels are low and the

banking sector is unable to support a fast-growing economy. This

scenario sees limited consolidation in the sector and most banks remain

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sub-scale. New private sector banks continue on their growth trajectory of

25 per cent. There is a slowdown in PSB and old private sector bank

growth. The share of foreign banks remains at 7 per cent of total assets.

Banking sector value adds meanwhile, is only 3.3 per cent of GDP.

o NEED TO CREATE A MARKET DRIVEN BANKING SECTOR

WITH ADEQUATE FOCUS ON SOCIAL DEVELOPMENT

The term “policy makers”, refers to the Ministry of Finance and the

RBI and includes the other relevant government and regulatory entities

for the banking sector. The coordinated efforts between the various

entities are required to enable positive action. This will spur on the

performance of the sector. The policy makers need to make coordinated

efforts on six fronts:

Help shape a superior industry structure in a phased manner

through “managed consolidation” and by enabling capital

availability. This would create 3-4 global sized banks controlling

35-45 per cent of the market in India; 6-8 national banks

controlling 20-25 per cent of the market; 4-6 foreign banks with

15-20 per cent share in the market, and the rest being specialist

players (geographical or product/ segment focused).

Focus strongly on “social development” by moving away from

universal directed norms to an explicit incentive-driven framework

by introducing credit guarantees and market subsidies to encourage

leading public sector, private and foreign players to leverage

technology to innovate and profitably provide banking services to

lower income and rural markets.

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Create a unified regulator, distinct from the central bank of the

country, in a phased manner to overcome supervisory difficulties

and reduce compliance costs.

Improve corporate governance primarily by increasing board

independence and accountability.

Accelerate the creation of world class supporting infrastructure

(e.g., payments, asset reconstruction companies (ARCs), credit

bureaus, back-office utilities) to help the banking sector focus on

core activities.

Enable labor reforms, focusing on enriching human capital, to help

public sector and old private banks become competitive.

o NEED FOR DECISIVE ACTION BY BANK MANAGEMENT

Management imperatives will differ by bank. However, there will

be common themes across classes of banks:

PSBs need to fundamentally strengthen institutional skill levels

especially in sales and mar marketing, service operations, risk

management and the overall organizational performance ethic. The

last, i.e., strengthening human capital will be the single biggest

challenge.

Old private sector banks also have the need to fundamentally

strengthen skill levels. However, even more imperative is their

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need to examine their participation in the Indian banking sector and

their ability to remain independent in the light of the discontinuities

in the sector.

New private banks could reach the next level of their growth in the

Indian banking sector by continuing to innovate and develop

differentiated business models to profitably serve segments like the

rural/low income and affluent/ HNI segments; actively adopting

acquisitions as a means to grow and reaching the next level of

performance in their service platforms. Attracting, developing and

retaining more leadership capacity would be key to achieving this

and would pose the biggest challenge.

Foreign banks committed to making a play in India will need to

adopt alternative approaches to win the “race for the customer” and

build a value-creating customer franchise in advance of regulations

potentially opening up post 2009. At the same time, they should

stay in the game for potential acquisition opportunities as and when

they appear in the near term. Maintaining a fundamentally long-

term value-creation mindset will be their greatest challenge.

The extent to which Indian policy makers and bank managements

develop and execute such a clear and complementary agenda to tackle

emerging discontinuities will lay the foundations for a high-performing

sector in 2010.

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CONCLUSION

We can conclude that the financial sector is a nerve system of

Indian economy. Banking plays an important role in development of

economy. For steady growth in economy innovations and development in

financial sector is very important.

Economy of any country faces lots of challenges and problems. To

tackle those problems financial sector plays a vital role. The financial

sector makes the economy efficient to the extent where it can rival other

developed economies in the world.

Financial sector also faces lots of problems but it should develop

certain strategies to come out of these problems which is very important

for healthy growth of economy.

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BIBLIOGRAPHY

FINANCIAL SRVICES AND MARKET

GORDAN AND NATRAJAN

INDIAN BANKING SYSTEM

V.K. BHALLA

INTRODUC TION TO ECONOMIC ANALYSIS

R. PRESTON MCAFEE

MONEY, BANKING, INTERNATIONAL TRADE AND PUBLIC FINANCE

D.M.MITHANI

BANKING AND PRACTICE

P.N.VARSHNEW

MONEYCONTROL.COM

MONEYPORE.COM

RBI.ORG.IN

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