financial sector refoms ppt
TRANSCRIPT
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Presenta t ionPresenta t ion
Ec onomic Env i ronment o f Bus inessEc onomic Env i ronment o f Bus iness
The Financ ia l Sec t or Reform sThe Financ ia l Sec t or Reform s
September 9, 2009The financial Sector Reforms 1
Slow but steady not to forget the socio economic needs
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GROUPGROUP
AJAY K. DHAMIJAAJAY K. DHAMIJA NN--11
SNEHAL SONISNEHAL SONI NN--4747
September 9, 2009The financial Sector Reforms 2
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Introduction
Major Contours of Reforms
Banking sector Reforms
Monitory Policy Reforms
Financial Markets Reforms
CoverageCoverage
September 9, 2009The financial Sector Reforms 3
Forex Market Reforms
Assesment
Conclusions
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I n t roduc t ionIn t roduc t ion
FIVE PrincipleFIVE Principle
Measured, gradual, cautious and steady sequencing of reformsMeasured, gradual, cautious and steady sequencing of reforms Introduction of mutually reinforcing normsIntroduction of mutually reinforcing norms Development of an Efficient, Competitive and Stable financialDevelopment of an Efficient, Competitive and Stable financial
sectorsector Development of Financial InstitutionsDevelopment of Financial Institutions
Introduction of complementary reforms across Monetary, Fiscal andIntroduction of complementary reforms across Monetary, Fiscal andexternal sectorexternal sector
September 9, 2009The financial Sector Reforms 4
Broad based reforms touching every sectorBroad based reforms touching every sector
Financial SectorFinancial Sector Monetary and Fiscal PolicyMonetary and Fiscal Policy Capital MarketCapital Market Foreign Exchange MarketForeign Exchange Market Money and Government Securities MarketMoney and Government Securities Market
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In ear ly 1990sIn ear ly 1990s Financial RepressionFinancial Repression
Extensive RegulationsExtensive Regulations
Administered Interest ratesAdministered Interest rates
Directed Credit ProgrammesDirected Credit Programmes
Weak Banking StructureWeak Banking Structure
Lion in jungle
vs
lion in cage
September 9, 2009The financial Sector Reforms 5
Lack of Proper Accounting & Risk management systemsLack of Proper Accounting & Risk management systems
Lack of transparency in operationsLack of transparency in operations
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In ear ly 1990sIn ear ly 1990s
PrePre--emption of resources from the banking system by theemption of resources from the banking system by thegovernment to finance its fiscal deficitgovernment to finance its fiscal deficit
Excessive structural and micro regulation that inhibited financialExcessive structural and micro regulation that inhibited financialinnovation and increased transaction costsinnovation and increased transaction costs
September 9, 2009The financial Sector Reforms 6
Relatively inadequate level of prudential regulation in theRelatively inadequate level of prudential regulation in thefinancial sectorfinancial sector
Poorly developed debt and money marketsPoorly developed debt and money markets
Outdated (often primitive) technological and institutionalOutdated (often primitive) technological and institutionalstructures that made the capital markets and the rest of thestructures that made the capital markets and the rest of thefinancial system highly inefficient.financial system highly inefficient.
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Resul t ing in t o Resul t ing in t o
Government regulated the price at which firms could issue equity,Government regulated the price at which firms could issue equity,the rate of interest which they could offer on their bonds, and thethe rate of interest which they could offer on their bonds, and thedebt equity ratio that was permissible in different Industriesdebt equity ratio that was permissible in different Industries
Working capital management was even more constrained withWorking capital management was even more constrained with
detailed regulations on how much inventory the firms could carrydetailed regulations on how much inventory the firms could carry
September 9, 2009The financial Sector Reforms 7
. .
Working capital was financed almost entirely by banks at interestWorking capital was financed almost entirely by banks at interestrates laid down by the central bankrates laid down by the central bank
Working capital finance was related more to the credit need of theWorking capital finance was related more to the credit need of theborrower than to creditworthinessborrower than to creditworthiness
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and and
Volatility was not something that most finance managers worriedVolatility was not something that most finance managers worriedabout or needed to.about or needed to.
The exchange rate of the rupee changed predictably and almostThe exchange rate of the rupee changed predictably and almostimperceptiblyimperceptibly
Administered interest rates were changed infrequently and theAdministered interest rates were changed infrequently and the
changes too were usually quite smallchanges too were usually quite small
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Financial genius consisted largely of finding ones way through theFinancial genius consisted largely of finding ones way through theregulatory maze, exploiting loopholes wherever they existed and aboveregulatory maze, exploiting loopholes wherever they existed and aboveall cultivating relationships with those officials in the banks andall cultivating relationships with those officials in the banks andinstitutions who had some discretionary powers.institutions who had some discretionary powers.
Even an overnight cash surplus could be parked in the overdraftEven an overnight cash surplus could be parked in the overdraftaccount where it could earn (or rather save) interest at the firmsaccount where it could earn (or rather save) interest at the firmsborrowing rate.borrowing rate.
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At larger leve l At larger leve l
The balance of payments crisis that threatened the internationalThe balance of payments crisis that threatened the internationalcredibility of the country and pushed it to the brink of defaultcredibility of the country and pushed it to the brink of default
The grave threat of insolvency confronting the banking system whichThe grave threat of insolvency confronting the banking system whichhad for years concealed its problems with the help of defectivehad for years concealed its problems with the help of defectiveaccounting policies.accounting policies.
Hindered efficient allocation of resourcesHindered efficient allocation of resources
September 9, 2009The financial Sector Reforms
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Major Cont ours of Reform sMajor Cont ours of Reform s
Removal of existing financial repressionRemoval of existing financial repression
Creation of an efficient, productive and profitable financial sectorCreation of an efficient, productive and profitable financial sector
Enabling the process of price discovery by the market determination ofEnabling the process of price discovery by the market determination ofinterest rates that improves allocative efficiency of resourcesinterest rates that improves allocative efficiency of resources
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Preparing the financial system for increasing international competitionPreparing the financial system for increasing international competition
Opening the external sector in a a calibrated mannerOpening the external sector in a a calibrated manner
Promoting financial stability in the wake of domestic and externalPromoting financial stability in the wake of domestic and externalshocksshocks
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Tw o phased ReformsTw o phased Reforms
First Generation (Early 1990):First Generation (Early 1990):-- IIstst
Phase:Phase:
Creating an efficient, productive and profitable financialCreating an efficient, productive and profitable financialsector to function with operational flexibility andsector to function with operational flexibility and
functional autonomyfunctional autonomy
September 9, 2009The financial Sector Reforms11
Second Generation (Mid 1990 ) :Second Generation (Mid 1990 ) :-- IIIIndnd phasephase
Strengthening the financial system and introducingStrengthening the financial system and introducingstructural improvementsstructural improvements
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Major Sec t ors o f Reform sMajor Sec t ors o f Reform s
Banking SectorBanking Sector
Monetary PolicyMonetary Policy
Financial MarketsFinancial Markets
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Forex MarketForex Market
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Bank ing Sec t or ReformsBank ing Sec t or Reforms
CompetitionCompetition EnhancingEnhancing MeasuresMeasures
Measures Enhancing Role of Market ForcesMeasures Enhancing Role of Market Forces
Prudential MeasuresPrudential Measures
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Institutional and Legal MeasuresInstitutional and Legal Measures
Supervisory MeasuresSupervisory Measures
Technology Related MeasuresTechnology Related Measures
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :
Com pet i t ion Enhanc ing MeasuresCom pet i t ion Enhanc ing Measures
Operational autonomy to Public Sector banksOperational autonomy to Public Sector banks
Reduction in public ownership of public sector banksReduction in public ownership of public sector banks Can raise capital from equity market up to 49% of paid up capitalCan raise capital from equity market up to 49% of paid up capital
Transparent Norms related to entry, mergers /amalgamation andTransparent Norms related to entry, mergers /amalgamation andovernance issues for Indian rivate sector forei n and ointovernance issues for Indian rivate sector forei n and oint--ventureventure
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banks, NBFCs and insurance companiesbanks, NBFCs and insurance companies
Permission for foreign investment in the financial sector in the form ofPermission for foreign investment in the financial sector in the form ofForeign Direct Investment (FDI) as well as portfolio investmentForeign Direct Investment (FDI) as well as portfolio investment
Permission to banks to diversify product portfolio and businessPermission to banks to diversify product portfolio and businessactivitiesactivities
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Measures Enhanc ing Role of Mark et Forc esMeasures Enhanc ing Role of Mark et Forc es
Sharp reduction in preSharp reduction in pre--emption through reserve requirementemption through reserve requirement
Market determined pricing for government securitiesMarket determined pricing for government securities
Disbanding of administered interest ratesDisbanding of administered interest rates
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disciplinediscipline
Introduction of pure interIntroduction of pure inter--bank call money market and developingbank call money market and developingmarkets for securitized assetsmarkets for securitized assets
AuctionAuction--based reposbased repos--reverse repos for shortreverse repos for short--term liquidityterm liquiditymanagement and Improved payments and settlementmanagement and Improved payments and settlement
mechanismmechanism
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Prudent ia l MeasuresPrudent ia l Measures
Introduction and phased implementation of international best practicesand norms related to:- CRAR, Income recognition, Provisioning andExposure
Strengthen risk management :- Assignment of risk-weights to various asset classes
Norms on connected lending, risk concentration
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Application of marked-to-market principle for investment portfolio andlimits on deployment of fund in sensitive activities
'Know Your Customer norms
'Anti Money Laundering' guidelines
Graded provisioning for NPAs Capital charge for market risk
Guidelines for ownership and governance, securitization and debtrestructuring mechanisms norms, etc
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an ng ec or e orm s :an ng ec or e orm s :Prudent ia l Measures:Prudent ia l Measures:-- Roadm ap for Basel I I Roadm ap for Basel I I
Implementing Basel II with effect from March 31, 2007Implementing Basel II with effect from March 31, 2007 Standardized Approach for credit risk and Basic IndicatorStandardized Approach for credit risk and Basic Indicator
Approach for operational risk (First Phase)Approach for operational risk (First Phase)
Migrate to the Internal Rating Based (IRB) Approach afterMigrate to the Internal Rating Based (IRB) Approach afteradequate skills are developed (Second Phase)adequate skills are developed (Second Phase)
Basel II will require more capital for banks in IndiaBasel II will require more capital for banks in India
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Presently CRAR is over 12 per centPresently CRAR is over 12 per cent
New and Innovative Funding optionsNew and Innovative Funding options
Perpetual debt instruments and nonPerpetual debt instruments and non--cumulative preference sharescumulative preference shares
Redeemable cumulative preference sharesRedeemable cumulative preference sharesand hybrid debt instrumentsand hybrid debt instruments
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Ins t i t u t iona l and Legal MeasuresIns t i t u t iona l and Legal Measures
Setting up of Lok Adalats (peoples courts), debt recovery tribunals,asset reconstruction companies, settlement advisory committees,corporate debt restructuring mechanism, etc.
Promulgation of Securitization and Reconstruction of Financial Assetsand Enforcement of Securities Interest (SARFAESI) Act, 2002 and itssubsequent amendment to ensure creditor rights
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Setting up of Credit Information Bureau of India Limited (CIBIL) forinformation sharing on defaulters as also other borrowers
Setting up of Clearing Corporation of India Limited (CCIL) to act as
central counter party for facilitating payments and settlement systemrelating to fixed income securities and money market instruments
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Superviso ry MeasuresSuperv iso ry Measures
Board for Financial Supervision as the apex supervisory authority forRisk based supervision
Introduction of CAMELS supervisory rating system(i.e., capital adequacy, asset quality, management, earning,
liquidity and system and control).
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Recasting of the role of statutory auditors with increased internalcontrol through strengthening of internal audit
Strengthening corporate governance
Fit and proper tests for directors along-with enhanced due diligence onimportant shareholders
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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Tec hnology Relat ed MeasuresTec hnology Relat ed Measures
INFINET as the communication backbone for the financialsector
Negotiated Dealing System (NDS) for screen-based trading ingovernment securities
Real Time Gross Settlement (RTGS) System
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True test of the success of the bankingreforms would be the extent of NPAs
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Moni t ory Pol ic y Reform sMoni t ory Pol ic y Reform s
Objectives
Instruments
Developmental Measures
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Institutional Measures
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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Object ivesObject ives
Twin objectives of Maintaining price stability and Ensuringavailability of adequate credit to productive sectors
Use of broad money (M2) as an intermediate target has been de-emphasized and a multiple indicator approach has been adopted
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Development of multiple instruments to transmit liquidity and interestrate signals in the short-term in a flexible and bi-directional manner
Increase of the inter-linkage between various segments of the financialmarket including money, government security and forex markets
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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Ins t ruments :Ins t ruments : Strat eg ic Shi ft : From Di rec t to Ind i rec tSt ra t eg ic Shi ft : From Di rec t to Ind i rec t
Open market operations (OMO) to deal with overall market liquiditysituation especially those emanating from capital flows
Introduction of Market Stabilization Scheme (MSS) as an additionalinstrument to deal with enduring capital inflows without affectingshort-term liquidity management role of LAF
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,through repo and reverse repo auctions Liquidity Adjustment Facility( LAF )
To nudge overnight interest rates within a specified corridor.
TO de-emphasize targeting of bank reserves and focus increasingly oninterest rates. reducing the cash reserve ratio (CRR) without loss of monetary control.
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LAF + OMO + MSS => FlexibilityLAF + OMO + MSS => Flexibility
Transition from direct instruments of monetary controlsuch as administered interest rate, reserve requirement,selective capital control) to indirect instruments like openmarket operations, purchase and repurchase ofgovernment securities
Advantages Certain dead weight loss for the system was saved.
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reater ex ty n eterm n ng ot t e quantum o a ustmentas well as the rates by responding to the needs of the system ona daily basis.
Modulation of the supply of funds on a daily basis to meet day-to-day liquidity mismatches.
demand for funds are affected through policy rate changes.
Stabilization of short-term money market rates.
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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Developm ent a l MeasuresDevelopm ent a l Measures
Discontinuation of automatic monetization through an agreement
between the Government and the Reserve Bank
Amendment of Securities Contracts Regulation Act (SCRA), to createthe regulatory framework
Introduction of automated screen-based trading in government
securities through Negotiated Dealing System (NDS).
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Setting up of risk-free payments and system in government securitiesthrough Clearing Corporation of India Limited (CCIL).
Phased introduction of Real Time Gross Settlement (RTGS) System
Deepening of inter-bank Repo market Deepening of governmentsecurities market by making the interest rates on such securitiesmarket related
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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Inst i t u t iona l MeasuresInst i t u t iona l Measures
Setting up of Technical Advisory Committee on MonetarySetting up of Technical Advisory Committee on MonetaryPolicy with outside experts to review macroeconomic andPolicy with outside experts to review macroeconomic andmonetary developments and advise the Reserve Bank onmonetary developments and advise the Reserve Bank onthe stance of monetary policythe stance of monetary policy
Creation of a separate Financial Market Department withinCreation of a separate Financial Market Department within
the RBIthe RBI
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Development of appropriate trading, payments andDevelopment of appropriate trading, payments andsettlement systems along with technological infrastructure.settlement systems along with technological infrastructure.
Success o f m onet a ry m anagem ent such as in te rest ra tes , i s con t i ngen tupon t he ex t en t and speed w i t h w h i ch changes in t he cen t r a l bank ' spo l ic y rat e a re t r ansm i t t ed t o t he spec t r um o f m arke t i n t e rest ra t esand exchange rat e i n t h e econom y and onw ard to t he rea l sect o r .
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Capi ta l Mark et Reforms :
Abolition of capital issues control and the introduction of free pricing ofequity issues (CCI)
Securities and Exchange Board of India (SEBI) was set up as the apexregulator of the Indian capital markets.
Primary market regulations:
Entry norms for capital issues were tightened
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Disclosure requirements were improved
Regulations were framed and code of conduct laid down formerchant bankers
Underwriters, mutual funds, bankers to the issue and other
intermediaries Corporate governance regulations:
Regulations were framed for insider trading
Regulatory framework for take overs was revamped
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Capi ta l Mark et Reforms
Secondary market regulations: Capital adequacy and prudential regulations were introduced for brokers,and other intermediaries
Dematerialization of scrips was initiated with the creation of a legislativeframework and the setting up of the first depository
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Settlement period was reduced to one week
Carry forward trading was banned
Tentative moves were made towards a rolling settlement system.
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Reform s in Governm ent Sec ur i t ies
Marke t
Institutional Measures
Increase in Instruments in the Government SecuritiesMarket
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Enabling Measures
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Governm ent Sec ur i t ies Market :Inst i t u t iona l Measures
Administered interest rates on government securities were replacedby an auction system for price discovery
Banks have been permitted to undertake primary dealer business whileprimary dealers are being allowed to diversify their business
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Central Government would cease to raise resources on behalf of StateGovernments . State Governments' capability in raising resources willbe market determined and based on their own financial health
Effective April 1, 2006, RBI has withdrawn from participating inprimary market auctions of Government paper fully market based system in the G-sec market.
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Governm ent Sec ur i t ies Market :Inc rease in Inst rument s
Market Stabilization Scheme (MSS) has been introduced, which hasexpanded the instruments available to the Reserve Bank for managingthe enduring surplus liquidity in the system
91-day Treasury bill was introduced for benchmarking Zero Coupon Bonds, Floating Rate Bonds, Capital Indexed Bonds were
issued Exchange traded interest rate futures were introduced
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OTC interest rate derivatives like IRS/ FRAs were introduced
Repo status has been granted to State Government securities in orderto improve secondary market
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Governm ent Sec ur i t ies Market :Enabl ing Measures
Foreign Institutional Investors (FIIs) were allowed to invest ingovernment securities subject to certain limits with non-banks allowedto participate in repo market
Introduction of automated screen-based trading in governmentsecurities through Negotiated Dealing System (NDS)
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securities through Clearing Corporation of India Limited (CCIL)
Phased introduction of Real Time Gross Settlement System (RTGS).
Introduction of trading in government securities on stock exchangesfor promoting retailing and Non-banks participation
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Reform s in Fore ign Ex c hange Mark etReform s in Fore ign Ex c hange Mark et
Exchange Rate Regime
Finance Mobilization
Institutional Framework
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Increase in Instruments in the Foreign Exchange Market
Liberalization Measures
R f i F i E h M k tR f i F i E h M k t
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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Ex c hange Rat e Regim eEx c hange Rat e Regim e Evolution of exchange rate regime from a single-currency fixed-
exchange rate system to fixing the value of rupee against a basket ofcurrencies and further to market-determined floating exchange rateregime
Adoption of convertibility of rupee for current account transactions
with acceptance of Article VIII of the Articles of Agreement of the IMF
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De facto full capital account convertibility for non residents
Calibrated liberalization of transactions undertaken for capital account
purposes in the case of residents
R f i F i E h M k tR f i F i E h M k t
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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Financ e Mobi l izat i onFinanc e Mobi l izat i on Indian companies were allowed to raise equity in international markets
subject to various restrictions.
Indian companies were allowed to borrow in international marketssubject to a minimum maturity, a ceiling on the maximum interestrate, and annual caps on aggregate external commercial borrowings
by all entities put together.
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Indian mutual funds were allowed to invest a small portion of theirassets abroad.
Indian companies were given access to long dated forward contractsand to cross currency options.
R f i F i E h M k tR f i F i E h M k t
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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Ins t i t u t iona l Framew orkIns t i t u t iona l Framew ork Replacement of the earlier Foreign Exchange Regulation Act (FERA),
1973 by the market friendly Foreign Exchange Management Act, 1999(FEMA)
Delegation of considerable powers by RBI to Authorized Dealers torelease foreign exchange for a variety of purposes
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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :
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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Inc rease in Ins t rum entsIncrease in Ins t rum ents
Development of rupee-foreign currency swap market
Introduction of additional hedging instruments, such as, foreigncurrency-rupee options
Permission to use innovative products like cross-currency options,
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n eres ra e swaps an currency swaps, caps co ars an orwarrate agreements (FRAs) in the international forex market.
Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :
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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Libera l izat ion MeasuresLibera l izat ion Measures Authorized dealers permitted to initiate trading positions, borrow and
invest in overseas market subject to certain specifications andratification by respective Banks Boards
Banks are also permitted to fix interest rates on non-resident deposits,subject to certain specifications
Use of derivative products for asset-liability management and fixoverni ht o en osition limits and a limits in the forei n exchan e
September 9, 2009The financial Sector Reforms
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market, subject to ratification by RBI
Permission to various participants in the foreign exchange market,including exporters, Indians investing abroad, FIIs, to avail forwardcover and enter into swap transactions without any limit subject to
genuine underlying exposure
Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :
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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Libera l izat ion MeasuresLibera l izat ion Measures
FIIs and NRIs permitted to trade in exchange-traded derivativecontracts subject to certain conditions
Foreign exchange earners permitted to maintain foreign currencyaccounts
Residents are permitted to open such accounts within the general limit
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of US $ 200,000 per year
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s : An assessm entPol ic y Reform s : An assessm entProgress of Commercial Banking in India
1969 1980 1991 1995 2000 20051 2 3 4 5 6 7
1 Commercial Banks 73 154 272 284 298 2882 No. of Bank Offices 8,262 34,594 60,570 64,234 67,868 68,339
Rural and semi
-urban bank offices 5,172 23,227 46,550 46,602 47,693 47491
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Office (000s) 64 16 14 15 15 164 Per capita
Deposit (Rs.) 88 738 2,368 4,242 8,542 16,6995 Per capita Credit
(Rs.) 68 457 1,434 2,320 4,555 10,1356 Priority Sector
Advances@ (%) 15 37 39 34 35 407 Deposits (% of
National Income) 16 36 48 48 54 65
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm ent
Distribution of Commercial Banks According to Risk-weightedCapital Adequacy
Year 10 % Total
September 9, 2009The financial Sector Reforms
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1 2 3 4 5 6
1995-96 8 9 33 42 92
2000-01 3 2 11 84 100
2004-05 1 1 8 78 88
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm entNon-Performing Loans (NPL) of Scheduled Commercial Banks(%)
Gross NPL/ Gross NPL/ Net NPL/ Net NPL/advances Assets advances Assets
1 2 3 4 5
1996-97 15.7 7 8.1 3.3-
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1998-99 14.7 6.2 7.6 2.91999-00 12.7 5.5 6.8 2.72000-01 11.4 4.9 6.2 2.52001-02 10.4 4.6 5.5 2.3
2002-03 8.8 4 4.4 1.92003-04 7.2 3.3 2.9 1.22004-05 5.2 2.6 2 0.9
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm entSelect Productivity Indicators of Scheduled Commercial Banks
(Rs. million at 1993-94 prices)
Year Business Profit per Businessper employee Employee per branch
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1992 5.4 0.02 109.91996 6.0 0.01 119.62000 9.7 0.05 179.4
2005 17.3 0.13 267.0
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm ent
September 9, 2009The financial Sector Reforms
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Despite record high international crude oil prices, inflation remains lowand inflation expectations also remain stable.
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm ent
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Fresh issuances under the MSS were suspended between November 2005 and April 2006
due to tight liquidity. Redemptions of securities/Treasury Bills issued earlier along withactive management of liquidity through repo/reverse repo operations under LiquidityAdjustment Facility - provided liquidity to the market and imparted stability to financialmarkets. With liquidity conditions improving, it was decided to again start issuingsecurities under the MSS from May 2006 onwards.
F R fF R f A A tA A t
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Forex Reform s :Forex Reform s : An Assessm entAn Assessm ent
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Exchange rate exhibiting reasonable two-way movement
Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary
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yy
Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm ent
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Credit Delivery increased from 30 per cent during 1999-00 to 41 per centduring 2004-05 and further to 48 per cent during 2005-06.
Conclus ionConclus ion
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Conclus ionConclus ion
Financial system in India, through a measured,
gradual, cautious, and steady process, hasundergone substantial transformation
Reasonably sophisticated, diverse and resilientsystem through well-sequenced and coordinatedpolicy measures aimed at making the Indian financial
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Effective monetary management has enabled pricestability while ensuring availability of credit tosupport investment demand and growth in the
economy.
Conclus ionConclus ion
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Conclus ionConclus ion
The multi-pronged approach towards managing
capital account in conjunction with prudential andcautious approach to financial liberalisation hasensured financial stability in contrast to theexperience of many developing and emergingeconomies
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had to be fine tuned to meet the challengesemanating from all global and domestic shocks.
Viewed in this light, the success in maintaining price
and financial stability is all the more creditworthy.
The overall objective of maintaining price stability inthe context of economic growth and financial stabilitywill remain
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Thank You