Impact of global financial meltdown on indian banking sectors: Strategies for achieving sustainable growth

The World Financial System is now undergoing a Global Economic Crisis of staggering proportions. The root cause of the economic and financial crisis was the United States mortgage market by selling sub-prime mortgages to large number of consumers with inadequate income. These mortgages were bundled into securitized paper investments and sold by Wall Street to major financial institutions across the globe. When the mortgages became non-performing, these securitized assets were transformed into toxic acid infecting the entire worldwide financial system. Indian Banking System comprises of Nationalized Banks, Private Sector Banks and Foreign Banks. This combination has been working marvelously since our liberalization process started in 1991. On the backdrop of recessionary trends in US, European and other developed countries, the under developed and developing countries including India have also experienced the pinch. During the worldwide recession that began in the later part of 2007, Indian Banking Industry felt immense pressure, but it could wither away those in a very systematic manner. There are various reasons for these tremendous achievements, including a conservative approach by Indian Banks on providing loans, exploring new markets which are immune to Global Meltdown, heavy focus of cost cutting and most importantly adhering to the strict guidelines issued by Reserve Bank of India (RBI). The methodology adopted to analyze the performance of Indian Banking Industry is to study the three most significant parameters such as Net non-performing assets as a percentage of Net Advances, Capital Adequacy Ratio and Return on Assets. The period of study covers from 2005-2010. All the data are secondary in nature. This paper focuses on the various factors with respect to Global Recession and the challenges faced and the strategies adopted by the Indian Bank to sail through the difficult times of recession.