Page 247 - General Knowledge

GENERAL KNOWLEDGE 2019

 It has been strengthened by a series of financial and regulatory reforms implemented
recently, such as flexibility in lending rates, gradual dilution of government holdings in public-
sector banks, and the easing of restrictions on private-sector and international banks.
 As the Indian economy is poised for a faster growth rate, its financial sector dominated by
both insurance and banking companies looks attractive for long-term investment.
 Indian banks and insurance companies can take advantage of the growing domestic market
while aspiring for global competitiveness.
 The banking sector witnessed a surge in credit demand from 2005 to 2010, as the
corporates came up with huge expansion plans, and the growth in the spending power of the
middle class led to a significant expansion in retail banking.

 However, the growth opportunities resulted in serious issues of capital adequacy, and the
prolonged recession led to the generation of a bulge in non-productive assets, invariably

making the sector look vulnerable.
 This led to continued volatility in banking stocks.
 Major issues faced by public-sector banks are:
 Capital adequacy.
 Competence in risk management
 Adoption of new technology
 Merger of smaller banks into viable entities
 Professionalism in management and supervision to replace the control of the finance
ministry
 Freedom to acquire global talent
Post-Independence
 After the partition of India in 1947, the Government of India initiated measures to play an
active role in the economic life of the nation, and the Industrial Policy Resolution adopted by
the government in 1948 envisaged a mixed economy.

 This resulted in greater involvement of the state in different segments of the economy
including banking and finance.
 The major steps to regulate banking included:
 In 1948, the Reserve Bank of India, India‘s central banking authority, was nationalized, and it
became an institution owned by the Government of India.
 In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of
India regulate control, and inspect the banks in India.
 The Banking Regulation Act also provided that no new bank or branch of an existing bank
could be opened without a license from the RBI, and no two banks could have common
directors.
Nationalization of Banks
 After independence the Government of India adopted planned economic development for the
country.
 Accordingly, five year plans came into existence since 1951.

 The economic planning basically aimed at the social ownership of the means of production.
 However, commercial banks were in the private sector those days.
 In 1950-51 there were 430 commercial banks.
 The Government of India had some social objectives of planning.

243 | P a g e shop.ssbcrack.com