Financial Sector Refoms Ppt

7/24/2019 Financial Sector Refoms Ppt

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Presenta t ionPresenta t ion

Ec onomic Env i ronment o f Bus inessEc onomic Env i ronment o f Bus iness

The Financ ia l Sec t or Reform sThe Financ ia l Sec t or Reform s

September 9, 2009The financial Sector Reforms 1

Slow but steady not to forget the socio economic needs


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GROUPGROUP

AJAY K. DHAMIJAAJAY K. DHAMIJA NN--11

SNEHAL SONISNEHAL SONI NN--4747



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Introduction

Major Contours of Reforms

Banking sector Reforms

Monitory Policy Reforms

Financial Markets Reforms

CoverageCoverage


Forex Market Reforms

Assesment

Conclusions


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I n t roduc t ionIn t roduc t ion

FIVE PrincipleFIVE Principle

Measured, gradual, cautious and steady sequencing of reformsMeasured, gradual, cautious and steady sequencing of reforms Introduction of mutually reinforcing normsIntroduction of mutually reinforcing norms Development of an Efficient, Competitive and Stable financialDevelopment of an Efficient, Competitive and Stable financial

sectorsector Development of Financial InstitutionsDevelopment of Financial Institutions

Introduction of complementary reforms across Monetary, Fiscal andIntroduction of complementary reforms across Monetary, Fiscal andexternal sectorexternal sector


Broad based reforms touching every sectorBroad based reforms touching every sector

Financial SectorFinancial Sector Monetary and Fiscal PolicyMonetary and Fiscal Policy Capital MarketCapital Market Foreign Exchange MarketForeign Exchange Market Money and Government Securities MarketMoney and Government Securities Market


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In ear ly 1990sIn ear ly 1990s Financial RepressionFinancial Repression

Extensive RegulationsExtensive Regulations

Administered Interest ratesAdministered Interest rates

Directed Credit ProgrammesDirected Credit Programmes

Weak Banking StructureWeak Banking Structure

Lion in jungle

vs

lion in cage


Lack of Proper Accounting & Risk management systemsLack of Proper Accounting & Risk management systems

Lack of transparency in operationsLack of transparency in operations


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In ear ly 1990sIn ear ly 1990s

PrePre--emption of resources from the banking system by theemption of resources from the banking system by thegovernment to finance its fiscal deficitgovernment to finance its fiscal deficit

Excessive structural and micro regulation that inhibited financialExcessive structural and micro regulation that inhibited financialinnovation and increased transaction costsinnovation and increased transaction costs


Relatively inadequate level of prudential regulation in theRelatively inadequate level of prudential regulation in thefinancial sectorfinancial sector

Poorly developed debt and money marketsPoorly developed debt and money markets

Outdated (often primitive) technological and institutionalOutdated (often primitive) technological and institutionalstructures that made the capital markets and the rest of thestructures that made the capital markets and the rest of thefinancial system highly inefficient.financial system highly inefficient.


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Resul t ing in t o Resul t ing in t o

Government regulated the price at which firms could issue equity,Government regulated the price at which firms could issue equity,the rate of interest which they could offer on their bonds, and thethe rate of interest which they could offer on their bonds, and thedebt equity ratio that was permissible in different Industriesdebt equity ratio that was permissible in different Industries

Working capital management was even more constrained withWorking capital management was even more constrained with

detailed regulations on how much inventory the firms could carrydetailed regulations on how much inventory the firms could carry


. .

Working capital was financed almost entirely by banks at interestWorking capital was financed almost entirely by banks at interestrates laid down by the central bankrates laid down by the central bank

Working capital finance was related more to the credit need of theWorking capital finance was related more to the credit need of theborrower than to creditworthinessborrower than to creditworthiness


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and and

Volatility was not something that most finance managers worriedVolatility was not something that most finance managers worriedabout or needed to.about or needed to.

The exchange rate of the rupee changed predictably and almostThe exchange rate of the rupee changed predictably and almostimperceptiblyimperceptibly

Administered interest rates were changed infrequently and theAdministered interest rates were changed infrequently and the

changes too were usually quite smallchanges too were usually quite small


Financial genius consisted largely of finding ones way through theFinancial genius consisted largely of finding ones way through theregulatory maze, exploiting loopholes wherever they existed and aboveregulatory maze, exploiting loopholes wherever they existed and aboveall cultivating relationships with those officials in the banks andall cultivating relationships with those officials in the banks andinstitutions who had some discretionary powers.institutions who had some discretionary powers.

Even an overnight cash surplus could be parked in the overdraftEven an overnight cash surplus could be parked in the overdraftaccount where it could earn (or rather save) interest at the firmsaccount where it could earn (or rather save) interest at the firmsborrowing rate.borrowing rate.


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At larger leve l At larger leve l

The balance of payments crisis that threatened the internationalThe balance of payments crisis that threatened the internationalcredibility of the country and pushed it to the brink of defaultcredibility of the country and pushed it to the brink of default

The grave threat of insolvency confronting the banking system whichThe grave threat of insolvency confronting the banking system whichhad for years concealed its problems with the help of defectivehad for years concealed its problems with the help of defectiveaccounting policies.accounting policies.

Hindered efficient allocation of resourcesHindered efficient allocation of resources

September 9, 2009The financial Sector Reforms

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Major Cont ours of Reform sMajor Cont ours of Reform s

Removal of existing financial repressionRemoval of existing financial repression

Creation of an efficient, productive and profitable financial sectorCreation of an efficient, productive and profitable financial sector

Enabling the process of price discovery by the market determination ofEnabling the process of price discovery by the market determination ofinterest rates that improves allocative efficiency of resourcesinterest rates that improves allocative efficiency of resources


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Preparing the financial system for increasing international competitionPreparing the financial system for increasing international competition

Opening the external sector in a a calibrated mannerOpening the external sector in a a calibrated manner

Promoting financial stability in the wake of domestic and externalPromoting financial stability in the wake of domestic and externalshocksshocks


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Tw o phased ReformsTw o phased Reforms

First Generation (Early 1990):First Generation (Early 1990):-- IIstst

Phase:Phase:

Creating an efficient, productive and profitable financialCreating an efficient, productive and profitable financialsector to function with operational flexibility andsector to function with operational flexibility and

functional autonomyfunctional autonomy

September 9, 2009The financial Sector Reforms11

Second Generation (Mid 1990 ) :Second Generation (Mid 1990 ) :-- IIIIndnd phasephase

Strengthening the financial system and introducingStrengthening the financial system and introducingstructural improvementsstructural improvements


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Major Sec t ors o f Reform sMajor Sec t ors o f Reform s

Banking SectorBanking Sector

Monetary PolicyMonetary Policy

Financial MarketsFinancial Markets


Forex MarketForex Market


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Bank ing Sec t or ReformsBank ing Sec t or Reforms

CompetitionCompetition EnhancingEnhancing MeasuresMeasures

Measures Enhancing Role of Market ForcesMeasures Enhancing Role of Market Forces

Prudential MeasuresPrudential Measures


Institutional and Legal MeasuresInstitutional and Legal Measures

Supervisory MeasuresSupervisory Measures

Technology Related MeasuresTechnology Related Measures


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :

Com pet i t ion Enhanc ing MeasuresCom pet i t ion Enhanc ing Measures

Operational autonomy to Public Sector banksOperational autonomy to Public Sector banks

Reduction in public ownership of public sector banksReduction in public ownership of public sector banks Can raise capital from equity market up to 49% of paid up capitalCan raise capital from equity market up to 49% of paid up capital

Transparent Norms related to entry, mergers /amalgamation andTransparent Norms related to entry, mergers /amalgamation andovernance issues for Indian rivate sector forei n and ointovernance issues for Indian rivate sector forei n and oint--ventureventure


banks, NBFCs and insurance companiesbanks, NBFCs and insurance companies

Permission for foreign investment in the financial sector in the form ofPermission for foreign investment in the financial sector in the form ofForeign Direct Investment (FDI) as well as portfolio investmentForeign Direct Investment (FDI) as well as portfolio investment

Permission to banks to diversify product portfolio and businessPermission to banks to diversify product portfolio and businessactivitiesactivities


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Measures Enhanc ing Role of Mark et Forc esMeasures Enhanc ing Role of Mark et Forc es

Sharp reduction in preSharp reduction in pre--emption through reserve requirementemption through reserve requirement

Market determined pricing for government securitiesMarket determined pricing for government securities

Disbanding of administered interest ratesDisbanding of administered interest rates


disciplinediscipline

Introduction of pure interIntroduction of pure inter--bank call money market and developingbank call money market and developingmarkets for securitized assetsmarkets for securitized assets

AuctionAuction--based reposbased repos--reverse repos for shortreverse repos for short--term liquidityterm liquiditymanagement and Improved payments and settlementmanagement and Improved payments and settlement

mechanismmechanism


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Prudent ia l MeasuresPrudent ia l Measures

Introduction and phased implementation of international best practicesand norms related to:- CRAR, Income recognition, Provisioning andExposure

Strengthen risk management :- Assignment of risk-weights to various asset classes

Norms on connected lending, risk concentration


Application of marked-to-market principle for investment portfolio andlimits on deployment of fund in sensitive activities

'Know Your Customer norms

'Anti Money Laundering' guidelines

Graded provisioning for NPAs Capital charge for market risk

Guidelines for ownership and governance, securitization and debtrestructuring mechanisms norms, etc


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an ng ec or e orm s :an ng ec or e orm s :Prudent ia l Measures:Prudent ia l Measures:-- Roadm ap for Basel I I Roadm ap for Basel I I

Implementing Basel II with effect from March 31, 2007Implementing Basel II with effect from March 31, 2007 Standardized Approach for credit risk and Basic IndicatorStandardized Approach for credit risk and Basic Indicator

Approach for operational risk (First Phase)Approach for operational risk (First Phase)

Migrate to the Internal Rating Based (IRB) Approach afterMigrate to the Internal Rating Based (IRB) Approach afteradequate skills are developed (Second Phase)adequate skills are developed (Second Phase)

Basel II will require more capital for banks in IndiaBasel II will require more capital for banks in India


Presently CRAR is over 12 per centPresently CRAR is over 12 per cent

New and Innovative Funding optionsNew and Innovative Funding options

Perpetual debt instruments and nonPerpetual debt instruments and non--cumulative preference sharescumulative preference shares

Redeemable cumulative preference sharesRedeemable cumulative preference sharesand hybrid debt instrumentsand hybrid debt instruments


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Ins t i t u t iona l and Legal MeasuresIns t i t u t iona l and Legal Measures

Setting up of Lok Adalats (peoples courts), debt recovery tribunals,asset reconstruction companies, settlement advisory committees,corporate debt restructuring mechanism, etc.

Promulgation of Securitization and Reconstruction of Financial Assetsand Enforcement of Securities Interest (SARFAESI) Act, 2002 and itssubsequent amendment to ensure creditor rights


Setting up of Credit Information Bureau of India Limited (CIBIL) forinformation sharing on defaulters as also other borrowers

Setting up of Clearing Corporation of India Limited (CCIL) to act as

central counter party for facilitating payments and settlement systemrelating to fixed income securities and money market instruments


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Superviso ry MeasuresSuperv iso ry Measures

Board for Financial Supervision as the apex supervisory authority forRisk based supervision

Introduction of CAMELS supervisory rating system(i.e., capital adequacy, asset quality, management, earning,

liquidity and system and control).


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Recasting of the role of statutory auditors with increased internalcontrol through strengthening of internal audit

Strengthening corporate governance

Fit and proper tests for directors along-with enhanced due diligence onimportant shareholders


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Bank ing Sec t or Reforms :Bank ing Sec t or Reforms :Tec hnology Relat ed MeasuresTec hnology Relat ed Measures

INFINET as the communication backbone for the financialsector

Negotiated Dealing System (NDS) for screen-based trading ingovernment securities

Real Time Gross Settlement (RTGS) System


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True test of the success of the bankingreforms would be the extent of NPAs


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Moni t ory Pol ic y Reform sMoni t ory Pol ic y Reform s

Objectives

Instruments

Developmental Measures


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Institutional Measures


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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Object ivesObject ives

Twin objectives of Maintaining price stability and Ensuringavailability of adequate credit to productive sectors

Use of broad money (M2) as an intermediate target has been de-emphasized and a multiple indicator approach has been adopted


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Development of multiple instruments to transmit liquidity and interestrate signals in the short-term in a flexible and bi-directional manner

Increase of the inter-linkage between various segments of the financialmarket including money, government security and forex markets


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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Ins t ruments :Ins t ruments : Strat eg ic Shi ft : From Di rec t to Ind i rec tSt ra t eg ic Shi ft : From Di rec t to Ind i rec t

Open market operations (OMO) to deal with overall market liquiditysituation especially those emanating from capital flows

Introduction of Market Stabilization Scheme (MSS) as an additionalinstrument to deal with enduring capital inflows without affectingshort-term liquidity management role of LAF


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,through repo and reverse repo auctions Liquidity Adjustment Facility( LAF )

To nudge overnight interest rates within a specified corridor.

TO de-emphasize targeting of bank reserves and focus increasingly oninterest rates. reducing the cash reserve ratio (CRR) without loss of monetary control.


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LAF + OMO + MSS => FlexibilityLAF + OMO + MSS => Flexibility

Transition from direct instruments of monetary controlsuch as administered interest rate, reserve requirement,selective capital control) to indirect instruments like openmarket operations, purchase and repurchase ofgovernment securities

Advantages Certain dead weight loss for the system was saved.


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reater ex ty n eterm n ng ot t e quantum o a ustmentas well as the rates by responding to the needs of the system ona daily basis.

Modulation of the supply of funds on a daily basis to meet day-to-day liquidity mismatches.

demand for funds are affected through policy rate changes.

Stabilization of short-term money market rates.


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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Developm ent a l MeasuresDevelopm ent a l Measures

Discontinuation of automatic monetization through an agreement

between the Government and the Reserve Bank

Amendment of Securities Contracts Regulation Act (SCRA), to createthe regulatory framework

Introduction of automated screen-based trading in government

securities through Negotiated Dealing System (NDS).


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Setting up of risk-free payments and system in government securitiesthrough Clearing Corporation of India Limited (CCIL).

Phased introduction of Real Time Gross Settlement (RTGS) System

Deepening of inter-bank Repo market Deepening of governmentsecurities market by making the interest rates on such securitiesmarket related


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Moni t ory Pol ic y Reform s :Moni t ory Pol ic y Reform s :Inst i t u t iona l MeasuresInst i t u t iona l Measures

Setting up of Technical Advisory Committee on MonetarySetting up of Technical Advisory Committee on MonetaryPolicy with outside experts to review macroeconomic andPolicy with outside experts to review macroeconomic andmonetary developments and advise the Reserve Bank onmonetary developments and advise the Reserve Bank onthe stance of monetary policythe stance of monetary policy

Creation of a separate Financial Market Department withinCreation of a separate Financial Market Department within

the RBIthe RBI


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Development of appropriate trading, payments andDevelopment of appropriate trading, payments andsettlement systems along with technological infrastructure.settlement systems along with technological infrastructure.

Success o f m onet a ry m anagem ent such as in te rest ra tes , i s con t i ngen tupon t he ex t en t and speed w i t h w h i ch changes in t he cen t r a l bank ' spo l ic y rat e a re t r ansm i t t ed t o t he spec t r um o f m arke t i n t e rest ra t esand exchange rat e i n t h e econom y and onw ard to t he rea l sect o r .


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Capi ta l Mark et Reforms :

Abolition of capital issues control and the introduction of free pricing ofequity issues (CCI)

Securities and Exchange Board of India (SEBI) was set up as the apexregulator of the Indian capital markets.

Primary market regulations:

Entry norms for capital issues were tightened


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Disclosure requirements were improved

Regulations were framed and code of conduct laid down formerchant bankers

Underwriters, mutual funds, bankers to the issue and other

intermediaries Corporate governance regulations:

Regulations were framed for insider trading

Regulatory framework for take overs was revamped


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Capi ta l Mark et Reforms

Secondary market regulations: Capital adequacy and prudential regulations were introduced for brokers,and other intermediaries

Dematerialization of scrips was initiated with the creation of a legislativeframework and the setting up of the first depository


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Settlement period was reduced to one week

Carry forward trading was banned

Tentative moves were made towards a rolling settlement system.


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Reform s in Governm ent Sec ur i t ies

Marke t

Institutional Measures

Increase in Instruments in the Government SecuritiesMarket


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Enabling Measures


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Governm ent Sec ur i t ies Market :Inst i t u t iona l Measures

Administered interest rates on government securities were replacedby an auction system for price discovery

Banks have been permitted to undertake primary dealer business whileprimary dealers are being allowed to diversify their business


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Central Government would cease to raise resources on behalf of StateGovernments . State Governments' capability in raising resources willbe market determined and based on their own financial health

Effective April 1, 2006, RBI has withdrawn from participating inprimary market auctions of Government paper fully market based system in the G-sec market.


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Governm ent Sec ur i t ies Market :Inc rease in Inst rument s

Market Stabilization Scheme (MSS) has been introduced, which hasexpanded the instruments available to the Reserve Bank for managingthe enduring surplus liquidity in the system

91-day Treasury bill was introduced for benchmarking Zero Coupon Bonds, Floating Rate Bonds, Capital Indexed Bonds were

issued Exchange traded interest rate futures were introduced


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OTC interest rate derivatives like IRS/ FRAs were introduced

Repo status has been granted to State Government securities in orderto improve secondary market


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Governm ent Sec ur i t ies Market :Enabl ing Measures

Foreign Institutional Investors (FIIs) were allowed to invest ingovernment securities subject to certain limits with non-banks allowedto participate in repo market

Introduction of automated screen-based trading in governmentsecurities through Negotiated Dealing System (NDS)

-


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securities through Clearing Corporation of India Limited (CCIL)

Phased introduction of Real Time Gross Settlement System (RTGS).

Introduction of trading in government securities on stock exchangesfor promoting retailing and Non-banks participation


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Reform s in Fore ign Ex c hange Mark etReform s in Fore ign Ex c hange Mark et

Exchange Rate Regime

Finance Mobilization

Institutional Framework


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Increase in Instruments in the Foreign Exchange Market

Liberalization Measures

R f i F i E h M k tR f i F i E h M k t


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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Ex c hange Rat e Regim eEx c hange Rat e Regim e Evolution of exchange rate regime from a single-currency fixed-

exchange rate system to fixing the value of rupee against a basket ofcurrencies and further to market-determined floating exchange rateregime

Adoption of convertibility of rupee for current account transactions

with acceptance of Article VIII of the Articles of Agreement of the IMF


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De facto full capital account convertibility for non residents

Calibrated liberalization of transactions undertaken for capital account

purposes in the case of residents



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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Financ e Mobi l izat i onFinanc e Mobi l izat i on Indian companies were allowed to raise equity in international markets

subject to various restrictions.

Indian companies were allowed to borrow in international marketssubject to a minimum maturity, a ceiling on the maximum interestrate, and annual caps on aggregate external commercial borrowings

by all entities put together.


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Indian mutual funds were allowed to invest a small portion of theirassets abroad.

Indian companies were given access to long dated forward contractsand to cross currency options.



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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Ins t i t u t iona l Framew orkIns t i t u t iona l Framew ork Replacement of the earlier Foreign Exchange Regulation Act (FERA),

1973 by the market friendly Foreign Exchange Management Act, 1999(FEMA)

Delegation of considerable powers by RBI to Authorized Dealers torelease foreign exchange for a variety of purposes


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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :


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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Inc rease in Ins t rum entsIncrease in Ins t rum ents

Development of rupee-foreign currency swap market

Introduction of additional hedging instruments, such as, foreigncurrency-rupee options

Permission to use innovative products like cross-currency options,


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n eres ra e swaps an currency swaps, caps co ars an orwarrate agreements (FRAs) in the international forex market.

Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :


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Reform s in Fore ign Ex c hange Mark et :Reform s in Fore ign Ex c hange Mark et :Libera l izat ion MeasuresLibera l izat ion Measures Authorized dealers permitted to initiate trading positions, borrow and

invest in overseas market subject to certain specifications andratification by respective Banks Boards

Banks are also permitted to fix interest rates on non-resident deposits,subject to certain specifications

Use of derivative products for asset-liability management and fixoverni ht o en osition limits and a limits in the forei n exchan e


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market, subject to ratification by RBI

Permission to various participants in the foreign exchange market,including exporters, Indians investing abroad, FIIs, to avail forwardcover and enter into swap transactions without any limit subject to

genuine underlying exposure

Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :


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Reform s in Fore ign Ex c hange Market :Reform s in Fore ign Ex c hange Market :Libera l izat ion MeasuresLibera l izat ion Measures

FIIs and NRIs permitted to trade in exchange-traded derivativecontracts subject to certain conditions

Foreign exchange earners permitted to maintain foreign currencyaccounts

Residents are permitted to open such accounts within the general limit


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of US $ 200,000 per year

Financ ia l Sec t or and Monet aryFinanc ia l Sec t or and Monet ary


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Pol ic y Reform s : An assessm entPol ic y Reform s : An assessm entProgress of Commercial Banking in India

1969 1980 1991 1995 2000 20051 2 3 4 5 6 7

1 Commercial Banks 73 154 272 284 298 2882 No. of Bank Offices 8,262 34,594 60,570 64,234 67,868 68,339

Rural and semi

-urban bank offices 5,172 23,227 46,550 46,602 47,693 47491


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Office (000s) 64 16 14 15 15 164 Per capita

Deposit (Rs.) 88 738 2,368 4,242 8,542 16,6995 Per capita Credit

(Rs.) 68 457 1,434 2,320 4,555 10,1356 Priority Sector

Advances@ (%) 15 37 39 34 35 407 Deposits (% of

National Income) 16 36 48 48 54 65



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Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm ent

Distribution of Commercial Banks According to Risk-weightedCapital Adequacy

Year 10 % Total


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1 2 3 4 5 6

1995-96 8 9 33 42 92

2000-01 3 2 11 84 100

2004-05 1 1 8 78 88



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Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm entNon-Performing Loans (NPL) of Scheduled Commercial Banks(%)

Gross NPL/ Gross NPL/ Net NPL/ Net NPL/advances Assets advances Assets

1 2 3 4 5

1996-97 15.7 7 8.1 3.3-


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1998-99 14.7 6.2 7.6 2.91999-00 12.7 5.5 6.8 2.72000-01 11.4 4.9 6.2 2.52001-02 10.4 4.6 5.5 2.3

2002-03 8.8 4 4.4 1.92003-04 7.2 3.3 2.9 1.22004-05 5.2 2.6 2 0.9



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Pol ic y Reform s :Pol ic y Reform s : An Assessm entAn Assessm entSelect Productivity Indicators of Scheduled Commercial Banks

(Rs. million at 1993-94 prices)

Year Business Profit per Businessper employee Employee per branch


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1992 5.4 0.02 109.91996 6.0 0.01 119.62000 9.7 0.05 179.4

2005 17.3 0.13 267.0



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Despite record high international crude oil prices, inflation remains lowand inflation expectations also remain stable.



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Fresh issuances under the MSS were suspended between November 2005 and April 2006

due to tight liquidity. Redemptions of securities/Treasury Bills issued earlier along withactive management of liquidity through repo/reverse repo operations under LiquidityAdjustment Facility - provided liquidity to the market and imparted stability to financialmarkets. With liquidity conditions improving, it was decided to again start issuingsecurities under the MSS from May 2006 onwards.

F R fF R f A A tA A t


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Forex Reform s :Forex Reform s : An Assessm entAn Assessm ent


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Exchange rate exhibiting reasonable two-way movement



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yy



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Credit Delivery increased from 30 per cent during 1999-00 to 41 per centduring 2004-05 and further to 48 per cent during 2005-06.

Conclus ionConclus ion


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Financial system in India, through a measured,

gradual, cautious, and steady process, hasundergone substantial transformation

Reasonably sophisticated, diverse and resilientsystem through well-sequenced and coordinatedpolicy measures aimed at making the Indian financial


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Effective monetary management has enabled pricestability while ensuring availability of credit tosupport investment demand and growth in the

economy.



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The multi-pronged approach towards managing

capital account in conjunction with prudential andcautious approach to financial liberalisation hasensured financial stability in contrast to theexperience of many developing and emergingeconomies


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had to be fine tuned to meet the challengesemanating from all global and domestic shocks.

Viewed in this light, the success in maintaining price

and financial stability is all the more creditworthy.

The overall objective of maintaining price stability inthe context of economic growth and financial stabilitywill remain


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Thank You

Financial Sector Refoms Ppt

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