INDIAN BANKING: CURRENT SCENARIO & CHALLENGES.

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Content Define Indian Banking Current Scenario of Indian banking Current Challenges

Application of BASEL II (risk management). Technological intensity of banking. Enhancing governance Managing Monetary Policy in a

Globalizing Environment. Preventing asset price bubbles Financial Stability

Conclusion.

Banking

In general term, the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.

Banking Regulation Act, 1949, define banking as the acceptance of deposits of money from the public for the purpose of lending or investment

Current Scenario

No. Of banks: Scheduled Commercial Banks. Regional Rural Banks Other scheduled commercial Banks Non-Scheduled Commercial Banks

cont….

Current scenario

Money supply growth for 2010-11 is placed at 17.0 per cent.

Deposits of commercial banks growing by

18.0 per cent. Investment ceiling in banking sector

FII. NRIs/PIOs

Current Challenges for Indian banking

BASEL II Application

Initially published in June 2004

Objectives of basel ii are Ensuring that capital allocation more risk sensitive; Separating operational risk from credit risk, and

quantifying both; Attempting to align economic and regulatory capital

more closely to reduce the scope for regulatory arbitrage.

Technological intensity of banking.

This is one area where Indian banking to show concern for following reasons

Dominance on foreign banks For making banking transaction fast For developing mobile banking

Enhancing governance

The recent irregularities involving accounting

firms in the U.S have made a new challenge

for Indian banking sector that is enhancing

governance in Indian banking sector. Steps

for this purpose BASEL II Ceiling of investment for FIIs & FDI RBI role for maintain control

Managing Monetary Policy in a Globalizing Environment

Global crisis requires global response

Global factors will impact on central bank policy decisions

Extent of challenge depends on the breadth of central bank’s mandate

Preventing asset price bubbles

Greenspan orthodoxy on asset bubbles

Crisis has dented the credibility of Greenspan orthodoxy

Monetary or regulatory action to prevent asset price bubbles?

Financial Stability

How does one define financial stability? Should central bank mandate include financial stability? Should financial stability be an exclusive or shared

responsibility? Do central banks have the necessary instruments? Does responsibility for financial stability encroach on the

independence of central banks?

Conclusion

Although Indian banking is on good condition because of its good regulation system but still there are some areas where Indian banking faces problems these five challenges which I discuss is given by our RBI governor in a summit which occurred in feb. of this year. These are some challengs for indian banking system for making our banking system more stable.

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