REFORMS IN THE INDIAN BANKING SECTOR
Date
2011-05-06
Authors
KAYUMBA, ROSETTE TUMUSIIME
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Abstract
This study assessed the achievements of gradualist reforms in the financial
sector, particularly in the Indian banking sector, during the last fifteen years. It
identifies its effectiveness and critical challenges. The Indian financial sector
reforms of the 1990s show a gradual relaxation of government controls over
the financial sector in the course of the decade. The study investigated ways
in which the financial performance of the banks could be improved.
Twenty-five representatives of key stakeholders in the Indian banking sector
were interviewed as key-informants. Of those interviewed, five respondents
were selected from each of the following pools: macroeconomics policy
professionals; academics; and career bankers from the public, private and
foreign banks in India. Pertinent official documents relating to the banking
reforms were also analysed. The research focused particularly on the issue of
government ownership of the banks.
This is a critical area where India’s policy differs from the current international
consensus. If privatization is not a practical option, it is necessary to explore
steps to improve the functioning of public sector banks. The research
discovered that several significant differences exist between independent
external assessments of the reforms and the government version. The official
version reflects a positive picture but independent research suggests
otherwise. Finally, recommendations are made to help the Indian banking
sector improve, for example, to lift its standards to internationally accepted
standards of capital adequacy, prudential norms and risk management
Description
MBA - WBS
Keywords
Banks and banking, India, Banking reforms, India