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 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
 Ethics and Corporate Governance in Indian business
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Ethics and Corporate Governance in Indian business

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  • 1. Banking sector performanceafter 1991 economicliberalization in India1/27/2013SUBMITED TO: Dr. Nilanjan SenguptaSUBMITED BY: SECTION (A) GROUP NO.- ONE (1) ABHISHEK MEHROTRA (003) AMRITESH (005) ANSHUL PANDEY (010) APOORV SRIVASTAVA (008) BHARAT SHARMA (011) BISWAJITA MOHANTY (013) LAKSHMI UNNIKRISHNAN W (038)
  • 2. 2 Banking sector performance after 1991 economic liberalization in India ACKNOWLEDGEMENT The satisfaction that the successful completion of the task would be incomplete without mentioning all those guidance and encouragements which crown the efforts with success. First and foremost we would thank the lord Almighty for His grace, mercy without which nothing would have been possible. We sincerely bow with reverence to the sanctum of KIAMS for giving us an opportunity to pursue our PGDM course. We are indebted to the Director, Dr. Gopal Iyengar, for facilitating a congenial academic environment in the college. We will be obliged toDr. Nilanjan Sengupta who has given us the opportunity to make a report on “Banking sector performance after 1991 economic liberalization in India”. We would like to say thanks to each other for being patient while doing the group activity and avoiding any type of plagiarism. Last but not the least we would like to thank our parents and friends. GROUP NO.- ONE (1) ABHISHEK MEHROTRA (003) AMRITESH (005) ANSHUL PANDEY (007) APOORV SRIVASTAVA (008) BHARAT SHARMA (011) BISWAJITA MOHANTY (013) LAKSHMI UNNIKRISHNAN W (038) January 27, 2013
  • 3. 3 Banking sector performance after 1991 economic liberalization in India INTRODUCTION TherecannotbeadiscussiononfinancialsectorinIndiawithoutthementionof thebankingindustry. Banking industryis considered as the backbone of Indian economy.Afterliberalizationofthepoliciesbythegovernment,thebankshavetobe morecompetitiveandperformance-oriented in thenewenvironment.Ithasbecome quitedifficultforthemtosurvive,performandsucceedin themarket.Underthese circumstances,thereisaneedtohavealookattheemergenceoftheIndianbanking systemrightfrom itearly daystillnow. LITERATURE REVIEW Considerable work of research takes place on efficiency and profitability of banks of Indian banks as well as other related fields like banking sector reforms etc. Hawast and John (1977) in their study stated that bank profitability by cost control methods. Varde and Singh (1979) said in their research that the reason of declining profitability of Indian banks during 1964-77 was low spread, high manpower and other operational expenses. Shah (1979) linked profitability with bank management, customer service and financial performance.Joshi (1986) stated the discussion and trends in profits and profitability of banks since nationalization. Minakshi and Kaur (1990) attempted to measure quantitatively the impact of the various instruments of monetary policy on the profitability of banks. They found that banks rate and reserve requirements ratios have played a significant role in having a negative impact on the bank’s profitability. Ojha (1992) in his study attempted to measure the productivity of public sector commercial banks in India like total assets per employee, total credit and deposits per employee, pre tax and post tax profits per employee, ratio of establishment expenses to working funds and net interest per employee. The study of Prajapati (1994) was a good attempt of post-liberalization researches made in the area for analyzing the comparison between the performance and strategies of two banks, although both of them operate in the similar microenvironment like common regulated borrowing and lending rates, statutory reserve requirement, priority sector lending obligations etc. These are some researches which is done and there are many other who have been contributing till now. HISTORY OF INDIAN BANKING Commercial banking has been one of the oldest business in India and the earliestreferenceof commercialbanking inIndia canbe tracedin thewritings of Manu. The establishment of the General Bank of India in the year 1786 marked the developmentofastructuredbankingsysteminIndia.LatertheBankofHindustanand BengalBankcameintoexistence.TheEastIndia Companyestablishedthreebanks. Thesethreebankswereamalgamatedintheyear1920toformthenewImperialBank ofIndia.TheImperialBankwasnationalizedandrenamedastheStateBankofIndia withthepassingoftheActin1955.TheSwadeshiMovementwitnessedthebirthof severalindigenousbanks,suchasPunjabNationalBank,BankofBarodaandCanara Bank. In order to increase itscontrol overthebanking sector, the GovernmentofIndiahadnationalized14majorprivatesectorbankswithdeposits January 27, 2013
  • 4. 4 Banking sector performance after 1991 economic liberalization in India exceedingRs.500millionin1969.Thishadraisedthe numberofscheduledbank branchesundergovernmentcontrolto84percentfrom31percent. The presentbanking systemcan be classifiedinto thefollowing categories: (i) Public SectorBanks (ii) PrivateSector Banks (iii) Foreign Banks (iv) RegionalRuralBanks (v) Co-operativeSectorBanks (vi) DevelopmentBanks. Whileseveralcommitteeshavegoneintotheproblemofcommercialbanksin India,therecommendationsmadebythehighlevelcommitteesonthefinancialsector reforms,chairedbyMr. M. Narasimham,laidthefoundationforthebankingsector reforms. These were: a) NarasimhamCommittee-I (1991). b) NarasimhamCommittee-II (1998). PHASES OF INDIANBANKING TheIndianbankingsystemanditsregulationscanbebetterunderstoodwhen dividedinto thefollowingtwo phases: Post-Nationalization Post-Liberalization. Theeraofnationalizationcommencedin1969whenthecountrys14major commercial bankswerenationalized.Incontinuationofthisprocess,6morebanks werenationalizedin1980. As aresultofnationalization,theaggregatedepositsof scheduledcommercialbanks(SCBs)whichstoodatRs.4,669croreduringJuly1969 touchedRs.2,33,753crorebytheendofMarch1992 (StatisticalTablesrelatingto Banks in India- Various Issues, RBI). Thepoorperformanceofthepublicsectorbankswasincreasinglybecomingan areaof concern.ThecontinuousdeclineofprofitabilityandriseofNon-Performing Assets(NPAs)ofbanks posedasignificantthreattothestabilityofthefinancial system. Till the early 1990s, the financial sector could be described as a classic exampleof‘financialrepression’. WHYLIBERALIZATION TheGovernmentofIndiaframeditspoliciesintheyear1991-92,keepingin viewthebenefitsofliberalization.Itwasexpectedthatintheprocessofopeningupits economy to the outside world, increased competition could turn the banks more efficient, bring about improvement and ultimately benefits the customers. Someoftherootcausesthatwerebehindthedullperformanceofthebanks promptedthe initiationof the bankingsector reforms.Someof these causes were: Greateremphasison directedcreditprograms; Regulatedinterestratestructure; Excessiveregulationson organizationsstructureand managerialresources; January 27, 2013
  • 5. 5 Banking sector performance after 1991 economic liberalization in India Lackof focus on profitability; Lackof competition; Lackof proper Accountingand Risk ManagementSystem; Lackof operationaltransparency and Excessivesupportfromgovernment. Thereformswereinitiatedwithanaimtobringaboutaparadigmshiftinthe banking industry. Hence, banking reforms were made an integral part of the liberalizationprocess.The financialsectorreformsstartedin1991hadprovidedthe necessary platform for the banking sector to operate on the basis of operational flexibility and functional autonomy; enhancing productivity, efficiency and profitability. IMPACTOFLIBERALIZATIONONTHEPERFORMANCE OF INDIANBANKING Banking sector plays an important role in the economic development of a country.ThebankingsectorreformsinIndiawerestartedasafollowupmeasureof economicliberalizationandfinancialsectorreformsinthecountry.Thebankingsector beingthelifelineoftheeconomywastreatedwithutmostimportanceinthefinancial sectorreforms.ThereformswereaimedattomaketheIndianbankingindustrymore competitive, versatile, efficient, and productive, to follow international accounting standards andtofreefromthegovernment’s control. Thereformsinthebanking industry startedin theearly 1990s havebeen continuedtillnow. TheIndianbankingregisteredtremendousgrowthinthepost-liberalizationera. Sincethe beginningof1991,therehasbeenaseachangeintherule,regulation, organization,and scopeand activitylevelofIndianfinancialsector.TheIndianbanking industryhaswitnessedarapidgrowth aftereconomicreforms.Ithasshiftedfrom regulatedtode-regulatedmarketeconomyanddefineda newroleforthebanks.All these reforms have changed the Indian banking market from ‘Sellers market’ to‘Buyersmarket’. The Narasimham Committee, 1991 h a d r e c o m m e n d e d several reformsi n banking sectorwith thechangewind of financialsectorreforms. Someof theimportantfinancialliberalizationmeasuresare: Reductionin pre-emptionof funds throughreductionof CRRand SLR. Introductionof prudentialprovisioning and CapitalAdequacy norms. Phasingout thedirectedcreditprograms. Deregulationof interestrates. I n f u s i o n of competition(Entry of PrivateSector Banks). Impartingtransparency. Introductionof universalbanking. Mergersand Acquisitions. Developmentof technology. Emphasison corporategovernance. The winds of change gained momentum in the last few years, such as globalizationofIndianeconomyandopeningupoffinancialservicesunderWTO.Itis expected that the banking sector will undergo mergers and acquisitions (M&A), consolidation, globalization of January 27, 2013
  • 6. 6 Banking sector performance after 1991 economic liberalization in India operations, development of new technology, best corporategovernancepracticesand universalization. Themainobjectiveofours istomakeasimpleassessmentoftheimpact ofthereformsoftheIndianbankingsector.Ithasbeenmorethan18yearsofthestart of the economicreformsin Indiaand financialsector reformswere one of theimportant partsof theprocess. The present chapter captures the impact of economic liberalization on the performanceofIndianbankingsectorinthelastdecadeandalsotheimpactofbanking sectorreformsontheIndianbankingsector. Acomparativeanalysisofvariousbank groups with respect to different variableshasbeentaken. Important indicatorsof scheduledcommercialbanks (SCBs) areanalyzedfrom1969 to 2008. Scheduled CommercialBanks at a Glance (InRs. Crores) Indicators June March March March March March 1969 2001 2005 2006 2007 2008 Numberof Commercial 89 300 289 222 183 174 Banks (a)Scheduled 73 296 285 218 179 170 CommercialBanks (b)Non-scheduled 16 4 4 4 4 4 CommercialBanks Numberof BankOffices 8262 67937 70373 71685 74346 77773 inIndia PopulationperOffice(in 64 15 16 16 15 15 thousand) AggregateDepositsof SCBs inIndia 4646 989141 1700198 2109049 2611934 3196940 (a)DemandDeposits 2104 159407 248028 364640 429731 524310 (b)TimeDeposits 2542 829734 1452171 1744409 2182203 2672630 CreditofSCB inIndia 3599 529271 1100428 1507077 1931190 2361913 DepositsofSCBsas percentageto GNP 15.5 56.0 60.0 65.4 70.1 74.7 CreditDepositRatio (Percent) 77.5 53.5 62.6 70.1 73.5 74.6 SCBsAdvancesto PrioritySector(Rs. 504 182255 381476 510175 632647 738686 crore) CashDepositRatio(Per Cent) 8.2 8.4 6.4 6.7 7.2 9.7 PerCapita Depositof SCBs(Rs) 88 9770 16281 19130 23382 28610 TheIndianbankingindustryhadmadesufficientprogressduringthereforms period.The progressoftheindustrycanbejudgedintermsofgrowthofCreditand Deposits,Branch January 27, 2013
  • 7. 7 Banking sector performance after 1991 economic liberalization in India expansion,Advancesto Priority Sector, etc. Aggregate Deposits and Credit of Scheduled CommercialBanks Above shows thatthedemanddeposits and time depositsofscheduledcommercial banks(SCBs)hadincreased.Thegrowthoftimedepositsinabsolutetermshasbeen morethandemanddeposits.Thehighgrowthoftimedepositsoverdemanddepositsis mainlyduetohigherinterestratesbeingofferedbythebanksonsuchdepositsaswell as availability of taxbenefitsto certaindepositschemes. ThestudycarriedoutbyCRISILrevealedthatgrowthoftermdepositsisdueto the sensitivitiesofinterestrate, whileother depositssuchasdemandandsavings depositsshow nosensitivitiestointerestratemovement.Theinterestrateofferedby the scheduledcommercialbanks (SCBs) on termdeposits on anaveragewas 6 to9 per cent whichishavingamaturityperiodofthreetofiveyearslookingatthetrendofinterest rateoflastfourtofiveyears.Asaresultofthis,there isagrowthinaggregatedepositsofscheduledcommercialbanks.Alongwiththeincreaseinaggregatedep ositsofSCBs,thecreditofthebanks hasalso increased. Thegrowthofcredithasbeenlargely duetotherobustgrowthofindustrialsectorsandthegovernmentdecisiontoincrease creditto theagriculturalsector whichled torapid increaseinbank credit.ThepercapitadepositsofSCBsincreasedfromsimplyRs.88crorein1969to Rs.9,770crorein2001andtoRs.28,610croreinMarch2008.Moreover,depositsof SCBsaspercentageofGrossNationalProduct(GNP)atfactorcost(atcurrentprices) has increasedfrom15.5 per centin June 1969 to74.7 per centas on March 2008. PrioritySectorLending TheflowofcredittoprioritysectorsincreasedtoRs.7,38,686croreinMarch 2008ascomparedtoRs.1,82255croreinMarch2001andJustRs.504croreinJune 1969.CreditflowtotheprioritysectorismainlytoAgriculture,Smallscaleindustries, Housingand servicesector.Theshareofprioritysectoradvancestototalcredithas increasedto32.9percentason March2008ascomparedto14.00percentinJune 1969.Theincreaseshowsmorethandoubletheincreaseinprioritysectoradvancesto totaladvancesover40years.Butitremainssameduringthebeginningofpost-reform period totilldate. Credit-DepositRatio Thecredit-depositratio(CDratio)ofallscheduledcommercialbanksovera periodoftimehasincreasedfrom53.5percentinMarch2001to74.6percentin March2008.Theincreaseindemandforcommercialcreditandalsofoodandnon-food credithasledtoanincreaseintotalcreditofscheduledcommercialbanks(SCBs)over the last few decades and as a result of this, the credit-deposit ratio continued to increase.But itstarteddecliningafter2007. Thecash- depositratioduringtheperiodofnationalizationofbanksin1969was 8.2percentandthesamehasdeclinedto7.2percentasonMarch2007.Thedeclining trendofcash- January 27, 2013
  • 8. 8 Banking sector performance after 1991 economic liberalization in India depositratiorevealsefficientmanagementofcashflowofSCBsduring theperiodconcerned.Butduring2007-08,thecash-depositratioincreasedto9.7per centas comparedto 7.2 per centduring theprevious year. Thesizeofthebankassetsofaneconomyisameasureoffinancialmaturity. ThesizeofthebankassetsinrelationtoGDPhasimportantimplicationsforfinancial developmentofanyeconomy.InIndia,theratioofbankassetstoGDPofallscheduled commercialbankswas53.4percentin1997-98anditincreasedto103.3percentin 2006-07.Outof this, publicsectorbanks (PSBs) accountedfor nearly 80 per centassets asapercentagetoGDP.Inthecaseofpublicsectorbanks(PSBs),theratioofbank assetstoGDPincreasedfrom44.1percentin1997-98to79.6percentin2006-07.The shareofprivatesectorbanksintheratioofbankassetstoGDProseto17.6percentin 2007frommerely 4.8 percent in1998. Theimpactofreforms(Financialliberalization)ontheperformanceofIndian banking sector was measured / analyzed on the basis of different indicators of performance.Tomakeacomparativeanalysisofvariousindicatorsofperformanceof differentbanksfrom1997-98to2007-08,thebanksweredividedintofivegroups,i.e., AllScheduledCommercialBanks,PublicSectorBanks, OldPrivateSectorBanks, New GenerationPrivateSectorBanks, and Foreign Banks. Tomeasuretheimpactofliberalization,privatizationandglobalizationonthe performanceof Indianbankingsector,thefollowingindicatorswereused toanalyzethe impactof variousreforms: ProfitabilityIndicators. Productivity Indicators. Assets Quality Indicators. (DPrudentialnormslikeCRR,SLR,structureofInterestrates,priority,sector lendingindicatory,competitionandinstitutionalfeaturesetc. Technology DevelopmentIndicators. PROFITABILITYINDICATORS Profit is the very reason for the continued existence of every commercial organization. Therateofprofitabilityandvolumeofprofits are,therefore, rightly consideredasindicatorsof efficiencyinthedeploymentofresourcesofthebanks. Profitability indicatesearningcapacityofthebanks. It highlightsthemanagerial competencyofthebanks.Italsoportraysworkculture,operatingefficiencyandoverall performanceof thebanks. Various structural factors include geographical spread of bank branches, decentralization in management and structural changes in deposits and advances. Bankingstructureandprofitabilitystructureofbankingsystemsacrosscountrieshavea bearingontheprofitabilityofbanks.Theprofitabilityofbanksisaffectedbyoneway ortheotherbythesefactors.Afterliberalization,profitabilityhasregaineditslost importance.Nowbanksarebeingdirectedtoachievetheprofitabilitytargets.Sinceall thebanksinthecountryfunctionundersimilarenvironment,thelowperformanceof anybankcanbeattributedtoalarge extenttotheirmanagerialinefficienciesand structuraldeficiency. Theimpactofreformsontheprofitabilityofbankingsectorhasbeenstudiedon January 27, 2013
  • 9. 9 Banking sector performance after 1991 economic liberalization in India thebasisofvariousvariablesofprofitabilitylikeincome,interestincome,non-interest income, gross profit, net profit, spread, expenditure, interest expended, operating expenses,costtoincomeaspercentageoftotalassetoffivebankgroupsfrom1997-98 to 2007-08.YEARS Income InterestIn Non NetProfit/Loss Expenditure Costto come InterestIncom Income e2000-01 11.77 9.27 2.47 0.93 10.84 60.252001-02 11.44 8.56 2.88 1.32 10.12 63.472002-03 10.35 7.68 2.64 1.56 8.78 53.032003-04 9.55 6.74 2.84 1.65 7.90 48.282004-05 8.49 5.94 2.52 1.29 7.19 45.292005-06 8.86 6.17 2.65 1.54 7.32 49.542006-07 9.90 6.53 2.57 1.67 7.43 51.09 These are as the % of total assets. PRODUCTIVITYINDICATORS Amongvariousproductivityindicators,employeeproductivityindicatorslike businessperemployeeandprofitperemployeearemostcommonlyused.Inaddition, businessperbranchand profitperbrancharealsousedtojudgethebranchlevel productivity. SelectedProductivityIndicatorsofScheduledCommercialBanks(Rs.in Lakh) Year Business Per Profit Per Business Per Employee Employee Branch 1996-97 66 0.4 1290 1997-98 75 0.5 1449 1998-99 84 0.3 1587 1999-00 97 0.5 1794 2000-01 115 0.5 1962 2001-02 137 0.9 2149 2002-03 150 1.2 2348 2003-04 163 1.5 2545 2004-05 173 1.3 2670 2005-06 217 1.5 3337 The business per employee of scheduled commercial banks increased over three-foldin realtermsfromRs.66lakhin1996-97toRs.217lakhin2005-06, exhibitinganannualcompoundgrowthrateofnearly10percent.Atthesametime,the profitperemployeeincreasedmorethanfour-fold,fromRs.40000toRs.150000over the sameperiod as shown in Table.BranchproductivityalsoshowedasimilartrendasisevidentfromTable4.14. Businessperbranchincreasedmorethan2.5timesduringtheperiodofstudy.Overall, thefiguressuggestdistinctiveproductivityimprovementsinthebankingsectoroverthe January 27, 2013
  • 10. 10 Banking sector performance after 1991 economic liberalization in India reformperiod.Such improvements could be driven by these factors: Technologicalimprovements,whichexpandtherangeofproductspossibilities,andacatchingup effect,aspeerpressureamongstbankscompelsthemtoraisetheproductivitylevel.In thecontextofgradualderegulationsoffinancialsector,severalfactorscouldhavebeen atwork:asignificantshiftofthebest practicefrontier,drivenbyacombinationof technologicaladvances,financialinnovationanddifferentstrategiespursuedbybanks suitedtotheirbusinessphilosophyandrisk-returnprofile, changingcompositionof banksinput- output,andreductionintotalcostduetoimprovementinoverallefficiency. Whileitisdifficulttopinpointtherelativemix ofthesefactorsinraising productivity, thebottomlineisclear.Indianbankswitnessedsignificantproductivity improvementsinpost- reformsperiod. ASSETSQUALITYINDICATORS The measureofNon-Performing Assets(NPAs) explainstheefficiencyin allocationofresourcesmadebythebankstoproductivesectors.TheproblemofNPAs ariseseitherduetobadmanagementbybanksorduetochangeinbusinesscycle.The sharpriseincreditgrowthcontinuedtobeaccompaniedbysignificantimprovementin assetquality.Amongtheseveralchannelsofrecoveryavailabletothebanksdealing with Non- Performing Loans (NPLs), the Debt Recovery Tribunal (DRT) and the SARFAESIActhavebeen mosteffectivein termsof amountrecovered. YEARS Gross NPAs Net NPAs 2000-01 4.90 2.50 2001-02 4.60 2.30 2002-03 4.00 1.90 2003-04 3.30 1.20 2004-05 2.52 0.92 2005-06 1.83 0.67 2006-07 1.46 0.58 These are as the % of total assets. PRUDENTIAL NORMS Sincethebeginningoffinancialsectorreforms,animportanttaskofthepolicy- makers was to bring in an appropriate regulatory framework. The design of an appropriate regulatory framework is to encourage competition and efficiency in bankingservicesandatthesametimeensureasafeandsoundbankingsector. Itmay beverydifficultandcomplexcomponentofbankingsectorliberalizationprocess.The Narasimham Committee - I report provided guidance on the actual design of the regulatory mechanism. The regulatory framework for banks known as ‘Prudential Regulation’intheliterature consistsbroadlyofcapitaladequacynorms,restrictionson the linesofactivitiesthatbankscanparticipatein,restrictiononentryanddeposit insurance. Theprudentialregulatoryframeworkfor banks hasbeendesignedtoaddress the January 27, 2013
  • 11. 11 Banking sector performance after 1991 economic liberalization in India following issues: MarketStructure, CapitalAdequacy Norms, Accountingand Provision for NPAs, Supervision of theBanks, and Privatizationof Banks. TECHNOLOGICAL INDICATORS TechnologicalDevelopment in Banks Technologicaldevelopmentandtheuseofinformationtechnology(IT)have transformedthefunctioningofthebankingsectorinthecountry.BanksinIndiahave usedITnotonlytoimprovetheirowninternalprocessesbutalsotoincreasefacilities andservicestothecustomer.Furthermore, thelargescaleincreaseinthenumberof transactionshandledbythebankshasenhancedthedependenceofbankingsectoron moderntechnologiesincludingtheuseofcomputers.Apartfromreducingtransactions cost,theuseoftechnologyhasalsoprovidednewavenuestobankstoexpandtheir outreach,especiallyintheremoteandruralareas.Severalbankshavebeenpositioning themselvesasaonestopshopfinancialserviceproviderwithafairlyexhaustiverange of products. Following technological development is done after liberalization. Computerizationin Banks ComputerizationofBranches inPublicSectorBanks Branches and ATMs ofBanks RealTime Gross Settlement (RTGS) and Other ElectronicTransactions AlthoughcashcontinuetobeusedheavilyinretailtransactionsinIndia,theuse ofchequeandseveralotherpaymentinstrumentssuchaCreditcards,Debitcardsand Smartcards,onthewhole,hasbeenincreasingintherecentyears.Theuseofpayment cards, both involumeand valueterms,morethan doubledin 2004- 05.AsaresultofsharpincreaseinRTGSandotherelectronictransactions,the proportionofelectronictransactionsbothinvolumeandvaluehasincreasedsharply. Electronicpaymentsare cheaperascomparedtopaper-basedinstruments.Theycan alsobecarriedoutfasterincomparisonwithpaper-basedtransactions.Theincreaseduseof electronicpaymentshas, thus, increasedtheefficiencyof the paymentsystem.TheRTGSwasoperationalizedonMarch26,2004.Itsusagefortransferof funds especially for largevalues andfor systematically importantpurposehas increased sincethen.ThelargevaluepaymentsystemsincludetheRealTimesGrossSettlement (RTGS), governmentsecuritiesclearingandFOREXclearing.TheRTGSsystemhas beeninoperationformorethanfouryearsinceitsoperationalization. RetailElectronicPayment Methods Theuseofelectronicpayments,bothretailandcard-based,increasedinrecent years,reflectingtheincreasedadoptionoftechnology.Theelectronicpaymentsystems suchaselectronic clearingservice(ECS)-bothdebitandcredit,nationalelectronic January 27, 2013
  • 12. 12 Banking sector performance after 1991 economic liberalization in India fundstransfersystem(NEFT)andcardbasedpayment(creditanddebit)arebecoming increasinglypopularasindicatedbytheincreaseintransactionthroughretailelectronic paymentmethods.BoththevariantsofECS,i.e.,ECS(credit)andECSdebitfordirect creditsuchassalaryandpensionpayments;andtheotherfordirectdebits,suchas collectionofbills,insurancepremiumandequatedmonthlyinstallment(EMI)payments ofloansarebeingincreasinglypreferred. REFERENCES: RBI,StatisticalTablesrelatingtoBanks in India, Various issues (1997-98 to 2007-08). ReportonTrendandProgressofBankinginIndia,variousissues(1997-98to2007- 08). ReserveBank ofIndia, IBA Bulletin(Variousissues) Reserve Bank ofIndia, RBIBulletin(Variousissues) ReserveBankofIndia–ReportoftheCommitteeFinancialSystem(Narasimham Committee),1991. January 27, 2013

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