T R A N S F O R M A T I O N

Dasarathi Mishra

Description

“The author, Dasarathi Mishra, a veteran central banker and bank supervisor
and a leading champion for financial education, has comprehensively
captured the critical role played by the central bank in the financial sector
reforms. Mr Mishra’s book is a good addition to the literature on post
reforms Indian financial system whose robustness and resilience remains
critical to strong, sustained, and inclusive economic growth of the country.”
— Harun R Khan, Former Deputy Governor,
Reserve Bank of India

Sujets

• Banking
• Economie gestion
• Economics
• Business
• Banks

Informations

• Publié par: Partridge Publishing India
• Date de parution: 24 août 2022
• Nombre de lectures: 0
• EAN13: 9781482837513
• Langue: English

Extrait

TRANSFORMATION
 
THREE DECADES OF INDIA’S FINANCIAL AND BANKING SECTOR REFORMS (1991–2021)
 
 
A GREAT TURNAROUND OF 1990S AND
EMERGING CHALLENGES
 
 
 
DASARATHI MISHRA
AN EXPERIENCED CENTRAL BANKER AND BANKING REGULATOR
 
 
 
 

 
 
Copyright © 2022 by Dasarathi Mishra.
 
ISBN:
Hardcover
978-1-4828-3753-7
 
Softcover
978-1-4828-3752-0
 
eBook
978-1-4828-3751-3

 
All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.
 
Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.
 
 
 
 
 
www.partridgepublishing.com/india

CONTENTS
Foreword
Preface
1   India’s Financial Sector Reforms: A Great Turn Around In The Banking Sector
2   Banking Sector Reforms In India - Towards Competitive Efficiency
3   Entry of New Banks In The Private Sector
4   Differentiated Banking In India – Turning A New Leaf
5   Foreign Banks’ Presence In India And Indian Banks’ Foray Overseas
6   Banking Regulation In India A Robust Framework
7   Ownership And Governance of Banks
8   Banking Supervision – From Rule Based To Risk Based
9   External Sector Reforms – Navigating Important Milestones
10   India’s NPA Management – A Creditable Achievement
11   Credit Information System In India – Ushering In A New Credit Culture
12   Consolidation of The Indian Banking Sector
13   Technology In Banks–A Transformative Role
14   Payment And Settlement System – A Game Changer
15   Fintech Revolution
16   Reforms In The NBFC Space
17   Micro Finance Institutions - Serving The Bottom Of The Pyramid
18   Consumer Protection For Small Depositors
19   Financial Inclusion – A Movement In India
20   Financial Literacy – Harbinger Of Change
21   Transformation of India’s Infrastructure
22   Capital Account Convertibility – A Journey
23   Gold Policy – Pragmatic And Progressive
24   India’s External Debt – Sustainable
25   Crypto Eco System – Challenges Galore
26   Impact Of Covid-19 On The Indian Economy And Policy Response
27   India’s Economic Journey Beyond 2021
Acknowledgements

 
 
 
To
Amit, Asima, Anshuman, Mihika and Sakuntala

FOREWORD
T he financial sector reforms, started in 1991, envisaged promoting a competitive, diversified and efficient financial sector in the country with the objective of improving allocative efficiency of available resources, strengthening financial health of the banks and financial institutions. The reform process resulted in visible improvement in profitability and efficiency of banks. The new standards focused attention on banks soundness and stability by introducing wide ranging reforms from infusing competition, introducing more stringent prudential norms to compliance with international regulatory standards. On the recommendation of the Narasimham Committee, licences were issued to new private banks which heralded a new generation of banks that were fully automated from commencement and had a demonstration effect on the public sector banks to enhance use of technology.
Because of the reform process and the sound management of capital account, India remained much less vulnerable than most of the East Asian economies during the South-East Asian crisis of 1997-98 and Global Financial Crisis of 2008-09.
To widen financial inclusion, RBI issued differentiated banking license viz., Small Finance Banks (SFBs) and Payments Banks (PBs) in 2015. Small financial banks, Payment banks were allowed to function in niche areas. They are playing a significant role in furthering financial inclusion.
Banking regulation must balance the focus on systemic aspects with promoting efficient and competitive financial systems and healthy institutions to support growth and economic development. In recognition of the fact that the costs of systemic crisis can be excessive, significant work has started post crisis at the international level to lay down minimum standards for assessing soundness of individual financial institutions as well as focusing on stability of the financial system through higher standards for the systemically important financial institutions and through macro prudential regulations.
NBFCs are an important segment of the financial sector as they support economic activity and complement the credit intermediation function of banks both by widening and deepening access to financial services. They have played a crucial role in providing access to the unbanked and enhanced competition in the financial sector. Their cost structure is lower, decision making is quicker, they are more customer oriented which results in more efficient financial services. On the liabilities side, NBFCs do not provide operating account facilities like savings and current deposits, cash credits, overdrafts etc. However, on the liabilities side they borrow from markets, banks and from other entities in the financial sector as well as external sources to the extent permitted. Due to divergent regulatory requirements, there was scope for regulatory arbitrage which allowed some NBFCs to grow the balance sheet and assume systemic importance. RBI has been making significant modifications in the regulatory framework for NBFC with a view to address systemic risks as also bring in proportionality of regulation based on scale.
Recent governance failures in financial services companies have brought to fore the importance of quality of governance on efficiency in allocation of resources, protection of depositors’ interest and maintaining financial soundness and systemic stability. It is erroneous to assume that regulatory oversight is a substitute for corporate governance. The lesson that public policy makers have learnt from the global financial crisis is that banks are risk repositories in the system – any notion of their risks being dissipated into or outside the system is inherently flawed. There is therefore need for limits, prudential safeguards, and adequate capital to support the risks both on and off-balance sheet. Bank boards and management need to lay down internal policies on limits depending on the business model and the risk appetite of the bank. There exists complementarily between regulation and corporate governance in banking. The impact of corporate governance on financial soundness does not end with commercial banks.
It is imperative to extend the principles of good corporate governance practices to cooperatives, NBFCs and other financial institutions. India has been in the forefront in many of the technological developments in both wholesale and retail payments systems. This has led to greater productivity, efficiency and speed in payments and settlement mechanism in the financial system.
Unified Payments Interface (UPI) is a game changer and unique. The system powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. This has been possible due to Reserve Bank of India’s initiatives and products to push digital payments, and banks and fintech incentivizing and encouraging customers to shift from paper-based to digital payment modes.
Globally, fintech has accelerated transformation in the financial sector. India is amongst the fastest growing fintech markets in the world. A recent survey indicates that 87 per cent of the digitally active population has adopted fintech, placing it as a leader in the world. Several factors have contributed to the spectacular growth of fintech in India. These are: funding by venture capital, and institutional investors, enhanced telecom, internet and smart phone penetration, favourable demographics, and augmented digital infrastructure. Good to see that the Reserve Bank’s calibrated regulatory approach has kept pace with the rapid developments in the fintech space.
The development of an efficient credit information system is considered critical for the development of a sound financial system. Setting up of Credit information companies piloted by RBI has been a landmark development. CIBIL- the first credit bureau in India was incorporated in 2001 and was launched its operations in April 2004. Following enactment of the Credit Information Companies (Regulation) Act (CICRA) in 2005, Rules and Regulations made in 2006, three other Credit Information Companies (CICs) were set up.
The pandemic continues to have an overwhelming influence on global and domestic macroeconomic conditions. In this milieu, the Reserve Bank has taken many pre-emptive and proactive steps to safeguard the economy from the ravages of the pandemic.
The book is comprehensive in coverage and has captured very well the three decades of Indian banking sector reforms 1991-2021. D Mishra with long experi