It's time for Indian banks to gear up to meet the challenges of implementing Basel II norms and combat competition from foreign players.
In the post-Independence era, the Indian banking industry has evolved significantly undergoing various phases of development. The success of the industry can be greatly attributed to the spate of economic reforms initiated since early 1990s which have resulted in the much needed Liberalization, Privatization and Globalization (LPG) model. The sector's assets contribute to around 65% of the country's GDP and hence the sector plays a pivotal role in the growth of the economy. Nevertheless, there are a few challenges like adhering to Basel II norms and preparing itself for foreign competition, come 2009.
During 2005-06, the Indian Government and RBI have initiated a few measures which played a crucial role in directing credit to the priority sectors. The central government has placed much emphasis on the agricultural sector by considering it as a priority sector. It, therefore, directed banks to increase their credit limits to the farmers. Effectively, the agricultural sector has witnessed more inflow of funds during the year.
In its efforts to make banking services affordable to the common man, RBI, in its annual policy statement, 2005, has directed banks to come up with "no-frills" accountswhere there need not be any minimum balance for opening accounts. This directive also ensures low and reasonable charges, which will enable the common man to open a bank account without any hesitation. |
