Indian Banking in the Globalised World

Banking sector reforms have supported the transition of the Indian economy to a higher growth path while significantly improving the stability of the financial system. In comparison with the pre-reform period, the Indian banking system today is more stable and efficient. However, the gains of the past decade need to be consolidated so that these could be translated to drive institutions, markets, and practices into a mature financial system that can meet the challenges of globalization. The banking system would, therefore, not only need to be stable, but also supportive of still higher levels of planned investments by channeling financial resources more efficiently from surplus to deficit sectors. Competitive pressures, as well as prudential regulatory requirements, have made banks risk-averse as reflected in their tendency to invest in relatively risk-free gilt instruments. The behavior and strategies of banking businesses need to change in favor of risk-taking even while performing core activities. Also, there is a need to ensure long-term finance to support development and growth in the economy even as restructuring takes place through mergers and universal banking. This book examines these necessary reforms. It addresses issues like the Basel-II Accord guidelines, second generation banking sector reforms, cost-benefit and productivity analysis of Indian banks, danger zone banks, privatization and comparative efficiency of Indian banks, and the recent reform measures. Vital statistics regarding the Indian banking sector and the recent Annual Policy Statement, 2008-09 of the Reserve Bank of India are also discussed.