Banking sector reforms and it's impact on Indian economy; an over view

Face of Global Banking is undergoing a transition. Banking is now a global issue. Reforms in the financial sector, covering banking, insurance, financial markets, trade, taxation etc. have been a major catalyst in strengthening the fundamentals of the Indian economy. The reform measures have brought about sweeping changes in this critical sector of the Indian's economy. Banking in India is generally fairly mature in terms of supply, product range, and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks in the year 2007. The broad objective of the financial sector reform has thus been to create a viable and efficient banking system. Improvements in the growth rate can be effected through three, not necessarily mutually exclusive channels: improving productivity of capital, through investments in human capital and raising total factor productivity (TFP). Indian economy has been recording impressive growth rates since 1991. The main thrust of the financial sector reforms has been the creation of efficient and stable financial institutions and development of the markets, especially the money and government securities market. In addition, fiscal correction was undertaken and reforms in the banking and external sector were also initiated. The year 1991–92 is the year of remarkable initiatives taken by the Government of India affecting the various facets of the Indian economy. Considering the scenario in which banking sector was in the year 1990–91, a number of initiatives were taken by the Reserve Bank of India for improving the efficiency of the banking sector and for opening up the banking sector. Taking this as a base, the author intends to examine the impact of the reforms on Credit Deposit ratio, Credit to GDP ratio, Investment in Government securities to deposits, share of business of public sector banks, the proportion of various types of advances etc. Further, it goes on to examine the difference in various aspects of the working results of the Public sector banks and private banks when compared with foreign banks.