Indian Financial Sector: Focus on Indian Banking Environment

Servicing as financial advisors, banks help customers manage their money by recommending different opportunities and serving as a securities intermediary.

Introduction: Banking sector The Indian Banking industry governed by the Banking Regulation Act of India, 1949, falling into two broad classifications, non-scheduled banks and scheduled banks. Within the commercial banks there are nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). With the economic growth picking up pace and the investment cycle on the way to recovery, the banking sector has witnessed a transformation in its vital role of intermediating between the demand and supply of funds. The revived credit off take (both from the food and non food segments) and structural reforms have paved the way for a change in the

The financial sector in India is predominantly a banking sector with commercial banks accounting for more than 60 percent of the total assets held by the financial system. India 's services sector has always served the country 's economy well, accounting for about 57 per cent of the gross domestic product. The financial services sector has been an important contributor to the country gross domestic product (GDP) accounting for nearly 6 percent share in 2014-15. The success of their financial sector is from the

However, this method does not directly address the massive and rising amount of non-performing loans in the banking sector. In conclusion, Enhanced Debt Management can only provide an alternative to eliminate the ongoing and expensive destruction of market value and the potential output deadweight loss. This method is cheaper than the Troika’s method (Werner,

One of the functions of the financial institutions is Commercial Banks. Commercial banks will accept deposits and provide very good security and make it suitable for their customers. This is just a normal role for the bank to give their customers money safe so that their customers don’t have to physically keep their belonging in their home or on them (APB, 2001). With having commercial banks there is no need to keep large amount of money in hand because the banks can handle it such as online banking, checks, debit card or credit card.

Based on their objectives one bank should decide as quickly not to get affected by non-performing asset

Beximco, Hallmark, T and Brothers and 12 other industrial groups have taken out 52% of state-owned Sonali Bank’s loans, totalling Tk19,966 crore. Twelve industrial groups have taken out 29% of Janata Bank’s loans totalling Tk11,500 crore. Similarly, 13 groups have taken out 23% of Agrani Bank’s loans. An increase of 3% in loan defaults would create a capital shortfall in five banks, a 9% increase would create a shortfall in 27 banks, and a 15% increase would create a shortage in 35 banks. Tk32,181 crore of all loan defaults are held by five banks, accounting for 51.8% of all loan defaults. According to market risk indicating that a 1% decrease in interest rates would create a capital shortage in five

Banking system is one of the many institutions that impinges on any economy and affects its performance for the better or the worse. In what measure a given banking system contributes to economic development depends upon the governing policy of the Government. As a rule, banking systems are adapted to the structure and needs of the particular economy they exist in. Indian economic policy has been founded on the philosophy of the economic growth with social justice.

The quality of Indian banks’ assets is likely to deteriorate over the next two years. This will be driven by the slowdown in the economy, and by the aging of loans made in recent years. The NPAs are considered as an important parameter to judge the performance and financial health of banks. The level of NPAs is one of the drivers of financial stability and growth of the banking sector. The Financial companies and institutions are nowadays facing a major problem of managing the Non Performing Assets (NPAs) as these assets are proving to become a major setback for the growth of the economy. NPAs in simple words may be defined as the borrower does not pay principal and

Financial System is the most important institutional and functional vehicle for economic transformation of any country. Banking sector is reckoned as a hub and barometer of the financial system. As a pillar of the economy, this sector plays a predominant role in the economic development of the country. The geographical pervasiveness of the bank coupled with the range and depth of their services make the system an indispensable

After the 2007-08 economic down-turns, RBI had issued a warning to banks in regards to mounting Non Performing

Gross NPAs plus written-off assets and restructured assets were 14.1 per cent of total bank loans as on September 2015, against 13.6 per cent in

In a year’s time, the number of banks in India will rise by more than 45%. Until 2014 there were 25 public sector banks (PSBs) and 20 private banks, i.e. a total of 45 banks. With the Reserve Bank of India (RBI) having granted licenses to 2 private banks, 11 payment banks and 8 small finance banks, the number will rise to 66 in about 18 months when these banks get functioning. Contrast this with the period from 1990 to 2014 when only 9 banks were given licenses, but in 2014-15 alone, 21 licenses have been granted; it spells a serious change in market dynamics.

Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps.

For the first time, the Eleventh Five Year Plan (2007-12) envisaged inclusive growth as a key objective as well as a strategy for economic development. Financial inclusion (FI) can therefore be very well called as 21st century banking. Its main aim is to extend the banking and financial services to every persons (or class of people), Projects (activities in various sectors) and places/parts (rural/semi urban or urban area) of the country. According to 2011 Census of India, out of the total 121 crorepopulation, rural India population is around 83.3 crores (nearly 70%) with round 2/3rd of total rural population is dependent upon agriculture as source of income and livelihood. We have 6.27 lakh villages with 99.7% of total rural population living there in. The population spread in Indian villages is presented in the following table.