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Trend and Progress of Banking in India


The Reserve Bank of India in its Report on Trend and Progress of Banking in India mentions that the Indian banking system has posted a strong performance during 2003-04. The financial performance of the other segments of the financial sector, viz., co-operative banks, financial institutions, and non-banking financial companies (NBFCs) also registered improvement in various areas induced by the supporting regulatory and supervisory process.

The empirical analysis highlights the continued stronger performance of banks in terms of higher profitability, improvement in capital adequacy and lower non-performing assets.The policy induced changes in the composition of assets of Urban Co-operative Banks (UCBs), especially, the growth in the investment of Government securities, led to a significant improvement in both the asset quality and profitability of scheduled UCBs.

As far as financial performance of Financial Institutions is concerned, the assets side has shown a compositional shift from loans and advances to investments and holding of more liquid assets. As at the end of March 2004, most of the FIs, barring IFCI and IIBI had CRAR much above the stipulated norm of 9 per cent.

The Reserve Bank has continued to strengthen the supervisory framework consistent with the increasing market orientation of the economy and with a view to achieving financial stability. The policy measures have been primarily guided by the objectives of increasing operational efficiency of monetary policy, strengthening prudential norms and risk management, enhancing credit delivery mechanism and developing technological and institutional infrastructure. This was buttressed by several initiatives to enhance accounting standards and reinforce corporate governance.

Financial stability has evolved as an increasingly important goal of policy across countries. In India, ensuring stability of the financial system has been the central plank of financial sector reforms.

RBI Perspective in medium-term is a forward looking outlook, encompassing the strengthening of prudential norms and the structural changes in the banking system with a view to achieving financial stability.

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