topic banking system in india. presented by 1.tahniyat sultana prova 16-017 2.tanvir ahmed16-009...
TRANSCRIPT
Topic
Banking System in India
Presented by
1.Tahniyat Sultana Prova 16-017 2.Tanvir Ahmed 16-009
3.Morium Akhter 16-0024.Sanjida Islam Khan 16-0185.Md.Farhadul Islam 16-066
Since Independence at 1947Since Independence at 1947
• In 1969 the 14 largest commercial banks were nationalized to ensure that
• In 1975 Regional and Rural Banks were established to increase the amount of agriculture loans
Effects if first golf war in 1990-91Effects if first golf war in 1990-91
• Severe balance of payments problems emerged
• Rapidly growing fiscal deficit
• Severe balance of payments problems emerged
• Rapidly growing fiscal deficit
Steps Taken By the Government:Steps Taken By the Government:
After the ReformsAfter the Reforms
• India became one of the fastest growing emerging markets in the 1990’s
• The growth of India’s service sector was due to rapid growth of communications, IT, financial service and community services
Nonetheless between 1997 and 2002 this growth rate slowed down to an average
• India became one of the fastest growing emerging markets in the 1990’s
• The growth of India’s service sector was due to rapid growth of communications, IT, financial service and community services
Nonetheless between 1997 and 2002 this growth rate slowed down to an average
“pancha sutra” or five principal“pancha sutra” or five principal
• Reforms of financial sector were based on five principal:
Establishment of National Stock Exchange(1992)Establishment of National Stock Exchange(1992)
• India’s no screen based exchange-the introduction of an auction system for govt. securities (1992) , and improved regulatory for the Securities and Exchange Board of India . In banking , the objectives were to keep banks financially sound while encouraging competition, and reducing govt. ownership of state banks.
• India’s no screen based exchange-the introduction of an auction system for govt. securities (1992) , and improved regulatory for the Securities and Exchange Board of India . In banking , the objectives were to keep banks financially sound while encouraging competition, and reducing govt. ownership of state banks.
Changes in banking sector
• Commitment to adopt the Basel 1 supervisory standards.
• Increased supervision of banks by establishing the Board for financial Supervision and being Bank of India autonomous.
• Commitment to adopt the Basel 1 supervisory standards.
• Increased supervision of banks by establishing the Board for financial Supervision and being Bank of India autonomous.
• Freeing up controls on interest rates .
• A reduction in the cash reserve ratio were further deregulated over time.
• A plan toi reduce govt. ownership of banks.
• Freeing up controls on interest rates .
• A reduction in the cash reserve ratio were further deregulated over time.
• A plan toi reduce govt. ownership of banks.
• Removal of the requirement that large loans had to be approved by the Reserve Bank of India.
• Granting new bank licenses, and easing restrictions on the operations of foreign banks.
• Removal of the requirement that large loans had to be approved by the Reserve Bank of India.
• Granting new bank licenses, and easing restrictions on the operations of foreign banks.
• Free entry of private firms into the mutual fund business.
• A commitment to reduce govt. shareholdings of the state owned banks from a minimum of 51% to one of 33%
• Free entry of private firms into the mutual fund business.
• A commitment to reduce govt. shareholdings of the state owned banks from a minimum of 51% to one of 33%
The current structure of the Indian Banking system-
Development financial institutions (DFIs): Includes
development institutions Industrial Development Bank of India
Specialized institutions Export Import Bank
Investment institutions Unit Trust of India(UTI), Life Insurance Corporation of India (LIC)
Refinance firms National Housing Bank
Liberalization Policy-
Major Problems With Indian Banking Sector
Major Problems With Indian Banking Sector
Poor Asset QualityPoor Asset Quality
Risk management System and Committee
Risk management System and Committee
Priority Sector LendingPriority Sector Lending
Government has identified certain sectors to distribute the total loans
Commercial banks have to allocate 40% of total loans The state banks require & allocate more than 40% of loans to
these groups
Government has identified certain sectors to distribute the total loans
Commercial banks have to allocate 40% of total loans The state banks require & allocate more than 40% of loans to
these groups
Area of Loan DistributionArea of Loan Distribution
Weak Financial Institutions and Destructive Unambiguity
Weak Financial Institutions and Destructive Unambiguity
Indication of weakness among state owned banks
Indication of weakness among state owned banks
Reserve Requirements & Lending RestrictionsReserve Requirements & Lending Restrictions
The traditional intermediary function of banks has been largely curtailed because of:
• Interest rate have declined• Increased prudential standards have made govt.
securities attractive because they carry a lower risk weight than most loans
• Employees of state banks are considered to be civil servants, they can be prosecuted under the anti-corruption law.
The traditional intermediary function of banks has been largely curtailed because of:
• Interest rate have declined• Increased prudential standards have made govt.
securities attractive because they carry a lower risk weight than most loans
• Employees of state banks are considered to be civil servants, they can be prosecuted under the anti-corruption law.
Bank SupervisionBank Supervision
Counter directives responsibility
• To conclude, India’s economic “miracle” was largely the results of reforms.
• Currency convertibility and capital controls were reformed at early stages
• External finance in the form of foreign direct & portfolio investment is being encouraged
• The currency has moved gradually over the years from a sterling peg to its current regime of a managed float.
• To conclude, India’s economic “miracle” was largely the results of reforms.
• Currency convertibility and capital controls were reformed at early stages
• External finance in the form of foreign direct & portfolio investment is being encouraged
• The currency has moved gradually over the years from a sterling peg to its current regime of a managed float.
Ongoing features of financial repression