Learning more from the financial reforms

[vijay123]

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Financial reforms have helped in major developments. The main objective of the reforms comprised of the following:
a) Stabilization of the economy so as to keep under control inflationary and balance of payments pressures
b) Deregulation of the real and financial sectors
c) Removal of the license and permit system from all spheres of production and domestic trade, to promote competition
d) Liberalization of international trade in various sectors to promote competition and efficiency by removing the high degree of protection enjoyed by the domestic industry
e) Integration with the world economy to attract capital and modern technology

The government appointed a high-level “Committee on Banking Sector Reforms” headed by a leading financial expert, to review the implementation of the reforms. The Committee in its report made wide-ranging recommendations covering various aspects of banking policy, institutional, supervisory and legislative dimension. The committee came out with recommendations with regard to
• Capital adequacy
• Asset quality
• Non performing assets
• Directed credit
• Prudential norms
• Disclosure requirements
• Asset liability management
• Earnings and profitability
• Systems and methods in banks
• Restructuring including mergers and amalgamations
• Reduction of government and lead bank shareholding to a lower percentage in the government controlled banks
• Devising effective regulatory norms
• A review of the banking sector laws

These recommendations are being progressively implemented. In a follow up of the Committee’s reference to weak banks in the context of restructuring banks, another Committee was appointed with the specific task of identifying weak government sector banks, examining their problems and suggesting strategies for restructuring them. The recommendations of he Committee were approved in principle. Firms like LoanMax of the rod aycox fame have learned valuable lessons and have never gone into the red.

[Michael_Anthony]

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