Financial Sector Reforms In India Research Articles

Stock Return, Growth and Inflation in India: Analysis of Stochastic Seasonality, Impulse Response and Multivariate GARCH

Thisstudy analyses the empirical interdependence among asset returns, industrialgrowth and inflation after controlling for interest rate by consideringstochastic seasonality and conditional volatility with monthly time series inIndia. The HEGY unit root test suggests that industrial growth and inflationexperience only stochastic trend and no persistent stochastic behaviour at anyother seasonal frequencies, while stock return follows persistent seasonaltrend. The study observes that causality goes from stock return to industrialgrowth, although the extent of causality is very low, but not the other wayround. This finding has significant policy implications particularly in thecontext of financial sector reforms in India. Inflation has negative impact onstock returns, while the innovations in stock returns have not transmitted toinflation.

Region-Wise Usage of Banking Services – A study of Gujarat

Financial services actively contribute to the humane & economic development of the nation. Financial services lead to social and economic safety hence, each & every individual should be provided with affordable institutional financial products/services popularly called ―Financial Inclusion‖. Despite witnessing substantial progress in financial sector reforms in India, it is overwhelming to note that nearly half of the rural households even today do not have any access to any source of funds (savings/credit) - institutional or otherwise. Hardly one-fourth of the rural households are assisted by banks. Hence the major task before banks are to bring most of those excluded, i.e. 75 percent of the rural households, under the mainstream of formal financial services. There is a need for the formal financial system to look at increasing financial literacy and financial counseling. As a part of corporate social responsibility now a day’s Indian banks and financial market players should actively look at promoting such programs. Financial products& services are identified as basic banking services like deposits accounts, institutional loans, access to payment, remittance facilities & also life & non-life insurance services. The present paper is an attempt to capture the region-wise usage of banking services. The study collected data of 900 respondents from five regions of Gujarat i.e. South Gujarat, North Gujarat, Central Gujarat, Saurashtra, and Kachchh. The study used a five-point Likert scale agreement method to understand the usage of banking services. Also, the study captured the demographic profile of respondents from. The primary data collected through a structure questionnaire.

Financial Sector Reforms in India: Implications for Banking and Taxation

Financial sector reforms in India have formed an important component of the overall economic reforms process initiated in the early 1990s. These reforms have followed a well calibrated approach. The general approach to financial sector reforms has been a transparent, collaborative and consultative process aimed at resolving many possible dilemmas. While the scope of financial sector reforms is immense, this paper focuses on the implications of these reforms for banking and taxation. In general, both these areas have witnessed significant transformation from reforms in terms of switchover to international best practices, enabling legislation, effective monitoring and supervision, and technology.

The conundrum of profitability versus soundness for banks by ownership type: Evidence from the Indian banking sector

Banks pursue profit like any business, but in their role as custodians of domestic savings, they are required to be cautious. Riskier but profitable advances may cause asset quality deterioration, thus affecting the long-term viability of the entity. Financial sector reforms in India from the early 1990s, have raised the level of competition for banks of different ownership types — public sector (PSB), old private banks, new private banks, and foreign banks. We use panel data on 75 banks across the ownership spectrum, for the period 2000–13, to examine their performance vis-à-vis these two measures — profitability and soundness. We find evidence of significant heterogeneity in performance across ownership type. Overall, we find that there is a negative association between the profitability and soundness measures, though these effects vary by ownership type. PSBs, constrained by social outreach commitments, perform comparatively worse. A reluctance to increase commercial loans implies a lack of investment in the knowledge capital necessary for effective risk management. The smaller old private banks have a dedicated client base; despite the pressure of non-performing assets, they remain profitable. Foreign banks maintain high capital adequacy ratio and relatively higher return on assets. The results also provide evidence that good human resource policy is vital for bank performance.

The influence of customer-perceived service quality on customers’ behavioural intentions: a study of public and private sector banks, class and mass banking and consumer policy implications

The financial sector reforms in India advocated globalization, deregulation and the liberalisation of entry norms to permit new banks in the private sector. This has increased competitive pressures on the state-owned public sector banks which concurrently have to fulfill their social obligations towards the financial development of the economy and citizens. This study explores how different dimensions of service quality influence customers’ behavioural intentions in class and mass banking and the implications for public and consumer policy. A contextually modified SERVQUAL instrument along with multiple regression and in-depth interviews were used. The study reveals that financial consumer policy must build security and trust in public administration and that the concept of quality must visualize public agencies as catalysts of a responsible and active civic society.

Independent Debt Management Office: Rationale, Scope and Structure

Ever since the onset of financial sector reforms in India in early nineties, the proposal for separation of debt management from monetary management and setting up of an independent Debt Management Office (DMO) gained prominence. As both debt and monetary management became market oriented, the potential conflict between the two has surfaced. Since RBI is a major investor in government securities, and its market interventions through open market operations in government securities and liquidity management operations through CRR or LAF can be clouded by debt management objectives. The fiscal-monetary nexus in that sense cannot be underestimated. As the role of RBI is restricted to management of market loans, debt management should be viewed in a holistic manner while structuring the new DMO. The interests of all stakeholders, namely, the central government, state governments and the Reserve Bank also need to be kept in view. The Institutional and organisational structure of DMO across the globe can serve as vital leads in crafting the structure of India DMO.

Management of Financial Institutions in India

Deregulation of financial markets provides both opportunities and challenges for financial institutions. Financial sector reforms in India induced competition in it which led to innovations and greater uniformity in services offered by them. This is the broad theme of the book.

Monetary Policy: Its Impact On The Profitability Of Banks In India

This purpose of this study is to investigate the impact of monetary policy on the profitability of banks in the context of financial sector reforms in India. We discuss the financial sector reforms and the implication of the banks, the various instruments of monetary policy in India, and the impact of monetary policy on the profitability of banks.

Service quality in Indian and foreign banks: Indian customers' perceptions and gender differences

The deregulation and financial sector reforms in India have changed the nature of banking services. Indian customers' quality perceptions pre-liberalisation was primarily dependent on the services offered by public sector banks. The quality expectations of the Indian customers can help banks in planning their strategies. The SERVQUAL model was modified to understand the service quality perceptions with reference to Indian and foreign banks. The banks need to assess the needs of women in planning their strategies. The results show that customers' perceptions regarding Indian and foreign banks differ significantly. The two genders differ in their service quality assessment.

Transformation in Indian Banks Through Corporate Governance-Emerging Challenges & Strategies for a New Gateway

Strengthening the financial sector and improving the functioning of financial markets have been the core objective of the financial sector reforms in India. The significant transformation of the financial system in the country is clearly evident from the changes that have occurred in the financial markets, institutions and products. In 1990, the country witnessed an economic crisis leading to a fast decline in the GDP, a high rate of inflation, adverse BOPs due to a widening gap in the current account deficit and a decline in the foreign exchange reserves. The country had to borrow resources from foreign central banks and other foreign government agencies against the pledge of gold so as to avoid a default on international indebtedness. There were some banking sector deficiencies ahead of the economy, which were adversely affecting the economic growth of our country such as low productivity and profitability, public sector banks were incurring losses year after year, giving poor customer service, using outdated work technology etc. Keeping in mind all these distortions in the economic, financial and banking sectors, the government of India and the RBI thought it was necessary to introduce reforms in the financial and banking sector, so as to promote rapid economic growth and development with stability through the process of globalization, liberalization and privatization in the financial system to make the financial system more competitive and integrated with the world economy through internationalization of financial markets in the world.

Is Inefficiency of Banks in India a Cause for Concern? Evidence from the Post-Reforms Era

Cost inefficiency of banks in many countries is quite high. Financial sector reforms in India are also aimed at improving efficiency, productivity and profitability of banks via increased competitiveness. An assessment based on a fairly general framework in the Indian context has found that cost inefficiency of domestic banks in the post-reforms period is not very high. Data also supports a declining trend in inefficiency over time. Slightly higher average inefficiency in public sector banks points to a need for granting more autonomy and instituting a proper incentive structure. Branch rationalisation may also lead to lowering their costs. However, as methodology for efficiency estimation is not fully settled, the need for testing robustness of the results through alternative formulations is stressed.

Risk-based Pricing: Are India's Credit Markets Moving Towards this Paradigm?

There is growing consensus amongst economists that a sound financial system is essential for an economy to achieve a high and stable rate of growth. The financial sector reforms in India in the last decade have enjoyed many important successes. At the same time, India's financial system has many glaring shortcomings. Perhaps the most serious concern for many is the fragility of some of our financial institutions. For others, it is the growing liabilities of the government while yet others worry that our arm's length securities markets have not taken off, and seem to be periodically laid low by scandal after scandal. These problems may be linked. At a conceptual level, because of a variety of institutional deficiencies, there appears to be too little private risk bearing capacity in the economy. The stance of public policy, as well as the increasing competition in credit markets, in numerous aspects, has served to stifle the ability of regulated finance companies to bear risk. What this means then is that even though the liberalization of the economy has increased competition and hence the level of risk in the economy, the risk is not being allocated well. Because risk is concentrated in the wrong places, incentives of key players are distorted, and economic outcomes are sub-optimal. This paper seeks to outline the key elements of a financial system that India will need in the quest for higher growth rates and the challenges and solutions chalked out for the same.

Reforming formal social security systems in India and Sri Lanka

This paper analyses the formal social security systems of India and Sri Lanka. While many of the social, demographic, and economic indicators differ markedly between the countries, the structure of the social security systems, challenges, and reform directions are quite similar. Thus, the provident fund organizations in both countries need to modernize and benchmark their governance, operations, and investment policies. The dualism in their systems, which has resulted in relatively generous non–contributory pensions being provided to civil servants, also needs to be addressed. This dualism and the fiscal unsustainability of current civil service pension arrangements lend urgency to reforms in this area in the two countries. The prospects for voluntary tax–advantaged private sector schemes are encouraging, particularly in India. The conditions for reforms are more favourable now owing to hopeful signs of an end to longstanding conflict in Sri Lanka, and decade–long experience with financial sector reforms in India.

Dr. Y.V. Reddy on Monetary and Financial Sector Reforms in India

Dr. Y.V. Reddy on Monetary and Financial Sector Reforms in India

Proposals for Financial Sector Reforms in India: An Appraisal

The Narasimham Committee Report has made a number of recommendations regarding the structure, organization, functions and procedures of the Indian financial system. In this article, Bhole has attempted a critical appraisal of the Report with a view to place the recommendations in a proper perspective and also to generate some thinking on the emerging issues.