As
part of the growth plan, adopting the best international
practices as prescribed by various international bodies
like the World Bank, BASEL Committee on Banking Supervision,
the International Accounting Standards Board on accounting
principles, International Standards and Codes on uniform
standards and codes, etc., and integrating the financial
system with the rest of the world are the aims of
any financial regulator. Different world economies
with the active support from their respective governments
have undertaken financial sector reforms, which aim
at not only increasing the growth process of the economy,
but also bringing about improvements in the living
standards of vast sections of the population. Various
economies of the world have decided to follow either
socialist pattern or capitalist pattern or a mixed
economy path, as a development strategy. Whatever
may be the policy the country chooses to follow, ultimately
it will succeed only if the pace of reform process
is clear and sound.
The
governments have ensured that banking reforms, as
part of the financial sector reforms, are implemented
through the intervention of regulatory bodies. For
the banking reform process to succeed, regulators
always hold discussions with the government as any
reform process has the potential of destabilizing
the economy and no regulator will like this to happen.
Countries such as Egypt, Portugal, Syria, Indonesia,
Bangladesh and India, to name a few, have chosen to
adopt socialist pattern for development, whereas countries
such as the US, the UK, France, Germany and Italy,
have decided to go in for capitalism. Leaving aside
the merits and the demerits of the policy chosen by
any country, one factor that clearly stands out is
the contribution of the growth process to the Gross
Domestic Product (GDP) of that country, a yardstick
for measurement of the country's progress. For instance,
the GDP growth of countries such as Egypt, Portugual,
Syria, Indonesia and India for the period 2003-2008
reveals that the average growth is low and hovering
at about 2.35% to 5.25% growth during the period 2003
to 2006 (Refer Annexure 1). The average growth rate
of the Indian economy over a period of 25 years, i.e.,
since 1980-81 (India's fiscal year is from April 1
to March 31) is around 6.0%. This shows that there
is quite a significant improvement over the annual
growth rate of 3.5% of previous three decades, i.e.,
from 1950-51 to 1979-80.
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