Banking sector reforms and npa a

This event called into question the previous banking policies of India and triggered the era of economic liberalisation in India in The dismal performance of these banks in raising capital from the market could be gauged from the fact that in the minimum shareholding of govt.

There is need to promote transparency by way of informing customers about different charges levied by them. The aim was to provide more options and flexibility to banks for their asset liability management operations and shift towards indirect International Research Journal of Commerce Arts and Science http: Of these, the terms of sale for SBI were finalised in —08 itself.

Banking Sector Reforms and NPA: A Study of Indian Commercial Banks

The committee further added that given that the government nominees to the board of banks are often members of parliamentpoliticians, bureaucrats, etc.

The first phase of the bank sector reforms is completed. It is against the background of these circumstances, that the development of a sound banking system was considered essential for the future growth of the financial system.

The design of an appropriate regulatory framework, which encourages competition and efficiency in banking services and at the same time, ensures a safe banking sector may be very difficult and complex component of the banking International Research Journal of Commerce Arts and Science http: The Committee recommended creation of Asset Reconstruction Funds or Asset Reconstruction Companies to take over the bad debts of banks, allowing them to start on a clean-slate.

The matter of concern is that the share of priority sector NPAs in gross NPAs of domestic banks witnessed an increase in over previous year. It is against the background of these circumstances, that the development of a sound banking system was considered essential for the future growth of the financial system.

Attempts to improve the financial soundness of the banking sector have been made by prescribing prudential norms. There is a need to improve credit flow to rural areas. Subsequently the strategy to attain CRAR of 8 percent was gradually raised to 9 percent with effect from Foreign banks have achieved the overall priority sector targets and sub-targets for export credit and nearly achieve the sub- target with respect to SSI as well.

The Committee submitted its report to the Finance Minister in November which was tabled in Parliament on 17 December Interest Rate Deregulation The main aim of the interest rate reforms was to simplify the complex and the tiered interest rate structure that India had during pre Greater attention to these issues would facilitate better finance structure of the economy and in the medium to long-term lead to broad based economic growth.

Economic and Political Weekly. Thus there is a need to reduce operating expenses in the interest of efficiency and profitability. This has been prompted more by the need to raise capital to meet the revise capital adequacy norms, rather than a conscious policy decision on the part of the govt.

Further it is a concern that a substantial portion of the total incremental NPAs of domestic banks in was contributed by agricultural NPA. They are also to follow the prudential norms in respect of banking operations, accounting practices and other policies as laid down by RBI.

Narasimham Committee on Banking Sector Reforms (1998)

It also acts as a shock absorber in the medium term since it gives the power to absorb shocks and thus avoid the risk of bankruptcy. Continuing uncertainty in the global markets has lead to lower exports of various products like textiles, engineering goods, leather, gems etc A hurt corporate sector is finding it difficult to pay loans Internal factors 1.

Autonomy in Banking[ edit ] Greater autonomy was proposed for the public sector banks in order for them to function with equivalent professionalism as their international counterparts. Of these, the terms of sale for SBI were finalised in —08 itself. The government focused through reform process on enhancing the role of market forces by making sharp reduction in pre-emption through reserve requirement, market determined pricing for government securities, disbanding of administered interest rates with a few exceptions and enhanced transparency and disclosure norms to facilitate market discipline; introduction of pure International Research Journal of Commerce Arts and Science http: There is a need to improve credit flow to rural areas.

In Proceedings of the conference on Economic Policy in Asia. As the NPA of the banks will rise, it will bring a scarcity of funds in the their money. Higher Capital Adequacy will improve the efficiency of banks in two ways: The committee was also criticised in some quarters as "anti-poor".

The main focus of reforms was in three areas: Reception[ edit ] Initially, the recommendations were well received in all quarters, including the Planning Commission of India leading to successful implementation of most of its recommendations.In the context of economic liberalisation and growing trend towards globalisation (external liberalisation), various banking sector reforms have been introduced in India to improve the operation efficiency and upgrade the health and financial soundness of banks so that Indian banks can meet internationally accepted standards of performance.

BANKING SECTOR REFORMS AND NPA: A STUDY OF INDIAN COMMERCIAL BANKS Meenakshi Rajeev and H P Mahesh 1 Abstract The issue of non-performing assets (NPA), the root cause of the recent global financial crisis, has been drawing the attention of the policy makers and academicians alike.

BANKING SECTOR REFORMS AND NPA: A STUDY OF INDIAN COMMERCIAL BANKS Meenakshi Rajeev and H P Mahesh 1 Abstract The issue of non-performing assets (NPA), the root cause of the recent global financial crisis, has been drawing the attention of the policy makers and academicians alike.

The first Narasimhan Committee (Committee on the Financial System – CFS) was appointed by Manmohan Singh as India's Finance Minister on 14 Augustand the second one (Committee on Banking Sector Reforms) was appointed by cheri197.combaram as Finance Minister in December 2) To make a comparative study of NPA‟s of public sector banks, private sector banks and foreign sector banks.

3) To understand the relationship between NPA‟s net profit and advances. banking sector, developments that have taken place and its impact on Indian commercial banks as a result of process of banking reforms initiated in This paper also examines the trends of NPAs in.

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