Today, banking sector is seen as a catalyst in economic growth of a country and, lot is expected from the banking fraternity. The recognition of banking, as a tool for all inclusive growth by economists, financial planners, reformist etc has made it an important sector in the Government’s planning of economic growth. The banking sector in India is there fore witnessing tremendous changes because of political, social and economic changes that are taking place domestically and internationally. The concept of banking, which was earlier restricted to accepting of deposits from public for the purpose of, has also undergone sea change. Today the banking sector is seen as a vehicle for all inclusive economic growth, social responsibility and equiv-distribution of national resources. Today banks are wooing existing customers, prospective customers by offering new facilities, products, and services in order to retain/increase their base in market. The way the banking has changed, Continue reading
Indian Banking System
Three Pillars of the Basel II Accord
While Basel I framework was confined to the prescription of only minimum capital requirements for banks, the Basel II framework expands this approach not only to capture certain additional risks in the minimum capital ratio but also includes two additional areas, viz. Supervisory Review Process and Market Discipline through increased disclosure requirements for banks. The main purpose of Basel II framework is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face while maintaining sufficient consistency so that this does not become a source of competitive inequality amongst internationally active banks. Advocates of Basel II believe that such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. Continue reading
Core Banking Solutions or Centralised Banking Solutions (CBS)
Core Banking Solutions (CBS) or Centralized Banking Solutions is the process which is completed in a centralized environment i.e. under which the information relating to the customer’s account (i.e. financial dealings, profession, income, family members etc.) is stored in the Central Server of the bank (that is available to all the networked branches) instead of the branch server. Depending upon the size and needs of a bank, it could be for the all the operations or for limited operations. This task is carried through advanced software by making use of the services provided by specialized agencies. Due to its benefits, a no. of banks in India in recent years have taken steps to implement the Core Banking Solutions with a view to build relationship with the customer based on the information captured and offering to the customer, the customized financial products according to their need. Advantages for Customer: Transaction of Continue reading
Article on Indian Banking Sector- “Survival is the mother of innovation”
“Banks can provide innovation products and services to their corporate and retail customers only when creative people are in place along with latest technology. Such people might provide innovative ideas to customers and banks. By converting there acceptable ideas into reality, banks can get an edge to compete effectively in the global village. Indian banking is also changing its shape rapidly by adopting innovative technology, products and services.” Innovation is the key to success for any activity. Innovation banking is therefore not an exception. Innovation banking is possible only when we have innovative people in banking. Moreover, innovative ideas of such people have to be heard at the right time by the right people. Only then the needed encouragement and support is given to convert such innovative ideas in reality. In the past, a generation gap is considered to be with a span of at least 10 years. Whereas with Continue reading
Role of Banking System in Economic Development
A safe and sound financial sector is a prerequisite for sustained growth of any economy. Globalization, deregulation and advances in information technology in recent years have brought about significant changes in the operating environment for banks and other financial institutions. These institutions are faced with increased competitive pressures and changing customer demands. These, in turn, have engendered a rapid increase in product innovations and changes in business strategies. While these developments have enabled improvement in the efficiency of financial institutions, they have also posed some serious risks. Banks play a very useful and dynamic role in the economic life of every modern state. A study of the economic history of western country shows that without the evolution of commercial banks in the 18th and 19th centuries, the industrial revolution would not have taken place in Europe. The economic importance of commercial banks to developing countries may be viewed thus: Promoting Continue reading
Interest Rate Administration by Reserve Bank of India (RBI) during Global Recession/Subprime Crisis
The subprime crises triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States, lead to major adverse consequences for banks and financial markets around the globe. Administered interest rates are one of the major measures for controlling the money supply in an economy. Bank rate, repo rate and reverse repo rate are administered by the Reserve Bank of India. The records show high fluctuation in the interest rates in the past in India. The Reserve Bank of India (RBI) made drastic cuts in interest rates during the recession period to make sure that the banks and individuals get the benefit of higher credit availability. The Government of India had the stimulus package for the India Inc., where as the Banking sector has been successfully managed by RBI measures. Meaning of Interest Rates/Policy rates: Interest rates can be defined from different perspectives, for an Individual an interest Continue reading