 ‡Phenomenal increase in the geographical coverage of our banking and financial institutions.  Despite impressive quantitative achievement- low efficiency and productivity, bad portfolios performance, and eroded profitability.  Several public sector banks and financial institutions were incurring losses year after year

 ‡1991 -RBI proposed the committee chaired by M. Narasimham, former RBI Governor to review the Financial System  ‡Review- aspects relating to the Structure,Organization, Procedures and Functioning of the financial system

 ‡Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector  ‡The Narasimham Committee laid the foundation for the reformation of the Indian banking sector

 ‡Higher rates of CRR(15%) and SLR(38.5%) ‡Directed credit programs ‡Political and Administrative interference ‡Subsidizing of credit ‡Mounting expenditures of banks

 ‡Reduction of Statutory Liquidity Ratio (SLR) to25 per cent over a period of five years  ‡Progressive reduction in Cash Reserve Ratio (CRR) to 3-5%  ‡Phasing out direct credit programs andredefining the priority sector Setting the capital adequacy ratio (CAR) to 8 percent by March 1996

 ‡Opening of More Pvt. sector banks ‡Motivation foreign banks to expand their network by opening new branches  ‡Deregulation of RBI and Finance ministry of India. Making RBI as a regulator of all Banks and let Banks takes participation in equity market with govt. stake of 51%  ‡Other Regulation introduced by RBI include Asset classification,NPA ratio

 ‡Corporate Governance : promoting customer relations and office culture  ‡Asset Reconstruction for bringing down NPA in future  ‡Risk Management ‡E-Banking

 Progress of banking sector reforms to date Financial sector reforms to strengthen India's financial system and make it internationally competitive

 ‡Need for stronger banking system ‡Experiment with concept of narrow banking ‡Small local banks ‡Capital Adequacy Ratio ‡Review and update banking laws.

 Emergence of new private sector banks  Opening up of vibrant capital market Great impact on banks balance sheets both on assets and liabilities side

 Liability Side  Deposit interest rate  Increase in capital Adequacy Requirement  Asset Side Reforms on Lending rate Lower CRR and SLR Other Reforms  ‡ Structural Reforms  ‡ Entry to new business lines

 ‡Nationalization of banks in 1969: 14 banks were nationalized ‡Branch expansion: Increased from 8260 in 1969 to in 2006  ‡Population served per branch has come down from to  ‡A rural branch office serves 15 to 25 villages within a radius of 16 kms However, at present only 32,180 villages out of 5 lakh have been covered

 ‡Deposit mobilization  (20 years)- 700% or 7 times (20 years)- 3260% or 32.6 times (11 years)- 1100% or 11 times  ‡Expansion of bank credit: Growing at % p.a. rapid growth in industrial and agricultural output.‡Development oriented banking: priority sector lending

 ‡Diversification in banking: Banking has moved from deposit and lending to Merchant banking and underwriting Mutual funds Retail banking ATMs Internet banking Venture capital funds Factoring