The Banking Sector Reforms In India Finance Essay

The Banking Sector Reforms In India Finance EssayThe commiting field reforms in India ar aimed at foundation garment of best international practices and technological changes for making the Indian banking welkin militant glob all(prenominal)y. The Indian banking system is to a greater extent efficient and stable today. Consequently on that point has been a rapid profit in the chip of banks in this country. The banking opinion is changing because of the increase number of mystical banks and the conflicting banks. Appargonntly in that respect is a cut throat competition between the banks. New and intermixture of go atomic number 18 offered by banks which are non-conventional and customized as per the customer requirements. Banks began to commute their services as part of their corporate strategy to cater to versatile customer segments.Structure of banking in IndiaThe Indian banking system is classified into schedule and non-schedule banks. The scheduled banks are then classified as state cooperatives banks and mercenary banks. The non-scheduled banks are classified as exchange cooperative banks and primary acknowledgment societies and the commercial banks.Commercial banks are classified in some(prenominal) the scheduled banks as well as the non-scheduled banks. Schedule banks are those which are include in the SECOND SCHEDULE of BANKING REGULATION ACT 1956.To be include in the second schedule a bankMust capture paid up capital and reserves of non less than Rs 5 lakhs.It must also satisfy the RBI that its affairs are not conducted in a manner detrimental to the pursual of its depositors.File plan banking structure in India.pngRBI(Reserve Bank of India) is the central bank of the country. As the central bank of the country RBI has the power to supervise and control all the banks with the intensions of developing a sound and efficient banking system. It also performs many divergent developmental and promotional functions.The functions of RBI are as followedNote cut offBankers bankThe central bankBanker to the governmentCustodian to Foreign stand in ReservesManagement regulation of exchangeCredit control early(a) functions.The Indian banking system has witnessed a substantial reformment in both stability and efficiency parameters such as capital position, asset quality, and boilersuit profitableness. There has been a remarkable improvement in the financial wellness of commercial banking field. The banking area reforms wealthy person improved the stability of the Indian financial system.PERFORMANCE OF COMMERCIAL BANKS IN INDIAIndicatorsThe performance and the efficiency is analysed in toll of positiveness, productivity, financial stability, and quality of assets. The following powers are usedProfitability indicators It is deliberate in terms of net profit of the bank. The interest, non-interest income, and the expenses influence the net profit. some of the important indicators of profitability are as follows i nterest group income as fate of total assets Interest income rack up assetsHigher ratio indicates higher profitability.Interest expended ratio Interest expenses wide assetsFall in ratio improves the profitabilityNet Interest Margin(NIM) interest income interest expensesTotal assetsA follow in NIM indicates the need to reorient the banks policies.Intermediation Cost of Assets Ratio (ICAR) Non-interest expensesTotal assetsLower the ratio higher the efficiency.Overhead Efficiency(Burden)Ratio Non-interest incomeNon-interest expensesHigher ratio indicates displace profitability. reproductions on Assets(RoA) Net profitTotal AssetsHigh RoA indicates better deployment of funds.Return on Equity(RoE) Net profitTotal EquityRoE testament help the banks to access new capital.Capital markets indicators The capital market indicator is based on the EPS and P/E ratio.Productivity Indicators productivity indicators are generally analysed in terms ofProfits per employeeBusiness per employeefisca l firmness of purpose Financial steadiness is reflected by the Capital Adequacy Ratio.CAR Total capitalRWAsRWAs Risk Weighted AssetsHigher the ratio better is the reinforcement of the banks.Asset Quality The quality of assets in the bank is shown by the direct of non-performing assets (NPAs). Lower the ratio better is the asset quality. The 2 ratios used areRatio of gross NPAs to gross advances.Ratio of net NPAs to net advances.11The higher up graph has the data of the gross NPAs of the banks. The X axis depicts the historic period and the Y axis depicts the dower. The red dotted line is for the Gross NPAs and the unappeasable dotted line is for the Gross advances. Looking at the graph we muckle confidently state that the Gross NPAs are increasing whereas the Gross advances are decreasing since 2010-11.PERORMANCE OF PUBLIC SECTOR BANKS, NEW PRIVATE SECTOR BANKS, AND hostile BANKS IN INDIAThe comparative performance of public sector banks, new personal sector banks, and u nusual banks is explained below for the recent yearshttp//stockshastra.moneyworks4me.com/wp-content/uploads/2012/03/Indian-Banking-Industry-Statistics.pngProductivity and profitability of banks Productivity is directly related to profitability. It is analysed in terms of agate line per employee and line of merchandise per branch.Business per employee The business per employee in the public sector banks has increased from Rs 471.18 lakhs in 2006-07 to Rs1013.63 lakhs in 2011-12. But is still low as compared to foreign banks. The business per employee for foreign banks has showed a tremendous increase from Rs974.77 lakhs in 2006-07 to Rs1559.74 lakhs in 2011-12. The business per employee for the private banks has also increased from Rs695.23 lakhs in 2006-07 to Rs823.26 lakhs in 2011-12.Profit per employee The kale per employee are the highest in foreign banks followed by new private sector banks in 2011-12. Per employee profit was Rs 16.3 lakhs in foreign bank, Rs 8.1 lakhs in ne w private sector banks and Rs 5.93 lakhs in public sector banks in 2011-12.Interest income The interest income of public sector banks, new private sector banks and foreign banks showed an increase to Rs366318, Rs 96827 and Rs 28520 respectively in 2011-12.Interest expended ratio The interest expended ratio equivalent as interest income has showed an increase for all the banks in 2011-12. The figures are Rs231153 lakhs, Rs57115 lakhs, Rs10622 lakhs.Financial Soundness The CAR(Capital Adequacy Ratio) is the most important indicator of financial soundness of banks. The capital to risk weighted assets ratio is shown is the figure below. The CRAR of public sector banks has been between 12 and 15 percent. The old private sector had CRAR deceitfulness between 12 and 15 percent. The new private sector had CRAR of more 15 percent. It goes the same with the foreign banks for the year ending in butt 2012.9Asset Quality the asset quality of a bank is shown by level of non-performing assets ( NPAs). Better quality of assets is the indicator of efficiency. There is a vast improvement in the efficiency of Indian banks.B1The NPAs as percentage of Average Total Assets are increasing marginally in 2011-12. The NPA of foreign banks rose from 0.8 in 2009-10 to 1.4 in 2010-11 to 1.6 in 2011-12. The new private sector banks showed an increase from 1.1 in 2009-10 to 1.2 in 2010-11 to 1.3 in 2011-12 approximately. The old private sector banks has shown an increase but less as compared to the other banks. The national banks have shown a gradual decrease in the NPAs since 2009-10 to 2011-12.Customer services In order to ease customer access to banking facilities, Indian banks have begun whirl bouquet of financial services to their clients. The number of branches proving CORE BANKING SOLUTION (CBS) is increasing tremendously. Under CBS a number of services are provided such as ANYWHERE BANKING. The number branches of PSBs that have implemented CBS increase from 35464 in abut 31, 200 8 to 46304 in March 31, 2011.ATMsThe banks are providing more and more ATM facilities to the customers. The foreign banks and new private sector banks are the larger contributors in this.http//www.isrj.net/PublishArticles/img/306_2.gifThe above graph is for the year 2008-09. The highest number of ATMs is provided by the state banks but on-site. The highest number of ATMs provided off-site is by the foreign banks.NEW TECHNOLOGY IN BANKINGThe banks in India are using Information Technology (IT) not only to improve their own internal process but also to increase the facilities and services to their customers. Computerization has taken place all over India. The only actor is to bring banking at the fingertips of the customers and employees.THE DIFFERENT FACILITIES PROVIDED AREVirtual bankingATMSDebit cardsCredit cardsPoint of Sales(PoS)Door step bankingInternet banking winding bankingTelebankingPhone bankingElectronic Funds Transfer (EFT)Electronic Clearing go (ECS)Real Time Gross Se ttlement (RTGS)REFRENCINGhttp//ebookbrowse.com/t-y-b-com-paper-iii-business-economics-eng-pdf-d419151576http//etheses.saurashtrauniversity.edu/54/http//schools-wikipedia.org/wp/e/Economy_of_India.htmhttps//docs.google.com/ attestator?a=vq=cacheQUJlL6E5-TAJijimt.org/papers/140-M582.pdf+hl=engl=ukpid=blsrcid=ADGEESjYSzZ1KSelInYi2gBvlRjTk0WyxRsdcYOCBvBaopI7N3pzl8naPA62sFiG0tfzK2x-ZKiVFyysLZhluPTr3O5WorzEXuj_Sn-X6CV1dQ8dqEo1UDv64oMzU7s_i2pw0XNURAnasig=AHIEtbRvIWrXt8CCpGACZrevqopfbX1i4Qhttp//stockshastra.moneyworks4me.com/wp-content/uploads/2012/03/Indian-Banking-Industry-Statistics.pnghttp//www.indiainbusiness.nic.in/studies_survey/banking_systemsurvey.pdfhttp//www.theinternationaljournal.org/ojs/index.php?journal=rjcbspage=articleop=viewpath=488http//www.icra.in/Files/ticker/Indian%20Banks-Note%28Revised%29.pdfhttp//www.icra.in/Files/ticker/IBS%20-%20FY11%20Perf.pdfhttp//www.rbi.org.in/scripts/PublicationsView.aspx?id=14629Business Economics 3 by Johnson, Mascarenhas, and Chatterjee.Th e institute of leased accountancy (India)http//www.google.co.uk/imgres?hl=ensa=Xtbo=dbiw=1366bih=630tbm=ischtbnid=-qRyMTq-g80w5Mimgrefurl=http//en.wikipedia.org/wiki/Banking_in_Indiadocid=RGeL8hvEN_HioMimgurl=http//upload.wikimedia.org/wikipedia/commons/thumb/9/92/NUMBER_OF_ATM.png/220px-NUMBER_OF_ATM.pngw=220h=169ei=xBvwUKiVCpS20QWhmoHYAgzoom=1iact=hcvpx=859vpy=12dur=180hovh=135hovw=176tx=61ty=46sig=115207852604614094774page=4tbnh=135tbnw=176start=72ndsp=25ved=1t429,r76,s0,i316