Sophisticated risk management techniques will play a much greater role in 21st century banking than it did in the previous century.

Traditionally, banking has been viewed as a unique busi ness wherein the primary function of a bank is to act as a leveraged intermediary, which sources money from the depositors and extends credit to businesses and individuals. A weak banking system could be a serious threat to a nation’s economy. Fortunately, the financial system in India is wellregulated and managed. The financial crisis of 1997 debilitated economies of many Asian countries. However, thanks to the Indian regulatory system’s strength, India remained untouched by the happenings in the neighboring countries.

The financial reforms introduced in the 1990s have started yielding results and the banking sector has become global in true sense of the term.Banking activities involve taking as well as managing risks. Lending, for instance, involves risk if the borrower defaults, or paying the fixed rate of interest when interest rates are actually falling. Such risks cause banks to earn lesser than what they pay on deposits.

The Analyst Magazine, Risk Management, Banking System, Operational Risk, Liquidity Risk, Indian Regulatory System, Risk-Based Supervision, Know Your Customer, KYC, Asset Liability Management, Credit Risk Management, Decision Making Process, Investment Policy, Basel Committee, Risk Management Techniques, Corporate Governance, Universal Banking Models.