BANKING SECTOR REFORMS IN INDIA: SOME REFLECTIONS

Professor Parimal H. Vyas; Ms. Bijal Zaveri

Professor Parimal H. Vyas Professor& Head, Department of Commerce including Business Administration, Faculty of Commerce, The M.S. University of Baroda, Vadodara (Gujarat)
Ms. Bijal Zaveri Ph. D Scholar, Department of Commerce including Business Administration, Faculty of Commerce, The M.S. university of Baroda, Vadodara (Gujarat)

Keywords: BANKING SECTOR, REFORMS

Abstract

Face of Global Banking is undergoing a transition. Banking is now a global issue. Reforms in the financial sector, covering banking, insurance, financial markets, trade, taxation etc. have been a major catalyst in strengthening the fundamentals of the Indian economy. The reform measures have brought about sweeping changes in this critical sector of the Indian's economy. Banking in India is generally fairly mature in terms of supply, product range, and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks in the year 2007. The broad objective of the financial sector reform has thus been to create a viable and efficient banking system. Improvements in the growth rate can be effected through three, not necessarily mutually exclusive channels: improving productivity of capital, through investments in human capital and raising total factor productivity (TFP). Performance of the banking sector has impact across the length and breadth of the economy. The major banking sector reforms comprises of modifying the policy framework; improving the financial soundness and credibility of banks; creating a competitive environment, and strengthening of the institutional framework. The banking sector reform measures to enhance efficiency and productivity through competition were initiated and sequenced to create an enabling environment for banks to overcome the external constraints which were related to administered structure of interest rates, high levels of pre-emption in the form of reserve requirements, and credit allocation to certain sectors. An attempt has been made in this paper to provide a brief overview on performance of the Banking Sector in India. It also includes a critical review of the performance as well as impact of Banking Sector Reforms in India. It has also covered the role and measures initiated by the Reserve Bank in India [RBI] in order to implement the Banking Sector Reforms in India. The concluding remarks are provided at the end.