Summary |
The banking system has successfully weathered various changes. The strength of the Indian banking system is clearly reflected in the successful implementation of Basle-I norms and improved earnings, sequential reform measures, maintenance of stipulated capital adequacy level, adoption of 90 days international norm of asset classification, institutional and legal reforms and expansion of the capital base with equity participation and diversification of ownership.
The banking sector reforms need to be examined against the broader macroeconomic canvas of rapid expansion of services sector, growth of external sector, need for enhancing investments in infrastructure and the critical role of agriculture and allied activities. These are not ephemeral issues and require thrust on greater specialization by banks in different niches of the market such as retail, agriculture, export, the small-scale and corporate sectors; greater reliance on non-fund business such as advisory and consultancy services, guarantee and custody services; greater overlap in product coverage between commercial banks and non-bank financial intermediaries; and greater financial disintermediation with large companies accessing securitized debt domestically and from financial markets abroad.
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