The fact that the Indian banks could remain insulated to a great extent
from the overall impact of the global banking crisis can possibly be attributed to
a series of factors. One of these could be the extent of globalization of
Indian banking sector. Did Indian banks get the benefit of the incomplete process
of global integration, which commenced two decades ago in the wake of a
severe balance of payment crisis in the country? If this is so, then the
question arises—should Indian banks go ahead with the agenda of globalization?
From a relatively small progress towards globalization, Indian banks have
not gained as much from their global linkages, and hence the fact that they
have not lost as much does not provide a convincing justification for their
relatively inconspicuous presence in the ring. It
is a fact that Indian economy as such has grown considerably, and its
aspiration for becoming a major global economic power is too apparent to get
ignored. Hence, globalization has not remained a mere option for the Indian banks;
it has now become an imperative. Globalization implies an ongoing process
by which regional economies, societies and culture become integrated through
a globe-spreading network of exchange. Globalization is not merely a process.
It is also a paradigm which requires redefining of rules, process and
restructuring/rebuilding of institutions wherever necessary.
The benefits of globalization have been well-known and are being
increasingly recognized. On the one hand, while globalization has thrown up a series
of opportunities, on the other, it has saddled the participants with a host
of concomitant risks. The ability of respective countries to conduct
international business and simultaneously manage the risks involved
thereto would depend to a great extent on the soundness of their financial
systems and the strength of the respective individual players. Keeping this in
mind, the Indian banking system has progressed to a great extent in the
adoption of appropriate prudential, regulatory, supervisory and
technological framework, almost on a par with the
international best practices, primarily to fortify itself against the risks
which may arise out of globalization.
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