Agricultural Finance: Past Performance and Future Reforms

It is well-known that India's economic reforms were set off by balance of payments crisis of 1991. At the time the banking system both commercial and cooperatives suffered from lack of competition, low productivity, high cost of intermediation, narrow capital base, etc. The financial sector reforms were necessarily set to alter organizational structure and ownership pattern, as well as, to infuse competition. After a decade, the RBI in its Report on Currency & Finance, 2001-02 had taken a review and observed that the financial sector reforms had brought about marked improvement in the financial, health of commercial banks in terms of assets quality, capital adequacy and profitability. The cooperative banks, to which the reforms were initiated little later, did not show much improvement in any of these areas.