Banking Sector Reforms

The Indian Banking industry is going through a period of intense change. Global trends are impacting the banking business through increasing competition, liberalisation, rising customer expectations, shrinking spreads, increasing dis-intermediation, competitive pricing and possibilities of macro-volatility. If the banks want to survive, there is no choice for them but to manage their operations efficiently and profitably and to ensure sustainable growth. The lessons to be derived from the Japanese and South-East Asian experiences is that, unlike goods markets, the liberalisation of financial markets is a complex affair. Narasimham Committee Reports (November 1991 and April 1998) have analysed the problems and made detailed recommendations for implementation. Attempt has been made in this Paper to present a broad view of Indian banking, to examine operational implications of various recommendations and suggest priorities to get our banking sector firmly on its feet. Otherwise, we may expose ourselves to currency and banking crises, which may be followed by a setback to the overall process of economic reforms.