Given the confidence and competency, and the willingness to innovate, the Indian banking system is poised to scale new heights in the years to come.Two salient features of financial year 2003-04 having all-pervasive effects on banking are rebounding economy and continuance of softer interest rates. After a lackluster performance in 2002-03, the economy staged a smart recovery in 2003-04 with a growth rate of 8.2% in real Gross Domestic Product (GDP), which is the fourth highest rate since 1950-51. All major segments of the GDP recorded better rates, but the performance was particularly strong in agriculture, which rose by 9.1%, mainly due to an extremely beneficial south-west monsoon.
After a hesitant start, industrial production staged a sharp recovery, which was spread over a large spectrum of industrial groups in the manufacturing segment. On the regulatory front, the authorities continued with their preference for softer interest rate regime. Besides, as announced earlier, the norm for asset classification was tightened by reducing the period from 180 to 90 days. On certain considerations, the Government directed banks to extend/increase credit flows to selected segments. It also prescribed lending rates, which were substantially lower than the prime lending rates, on loans to a few selected sectors of the economy.
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