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Introduction
Efficiency and profitability of the banking sector in
India has assumed primal importance due to intense competition, greater customer demands and changing banking reforms. This study attempts to measure the relative performance of Indian banks. For this study, we have used public sector banks, old private sector banks, new private sector banks and foreign sector banks. We know that in the service sector, it is difficult to quantify the output because it is intangible. Hence different proxy indicators are used for measuring productivity of banking sector. Segmentation of the banking sector in India was done along the following basis: number of banks, offices, number of employees, business per employees, deposits per employee, advances per employee, bank assets size, non-performing assets etc.
of commercial banks, financial institutions, stock exchanges and a wide range of financial instruments. It has undergone a significant structural transformation since the initiation of financial liberalization in 1990s. Before financial liberalization, since mid 1960s till the early 1990, the Indian financial system was considered as an instrument of public finance. The evolution of Indian financial sector in the post independent period can be divided in to three distinct periods. During the first period (194768), the Reserve Bank of India (RBI) consolidated its role as the agency in charge of supervision and banking control.
following categories: (i) Public Sector Banks (ii) Private Sector Banks (iii) Foreign Banks (iv) Regional Rural Banks (v) Co-operative Sector Banks (vi) Development Banks.
better understood when divided into the following two phases: Post-Nationalisation Post-Liberalization
Liberalization
1991-92, keeping in view the benefits of liberalization Some of the root causes that were behind the dull performance of the banks prompted the initiation of the banking sector reforms. Some of these causes were: Greater emphasis on directed credit programmes Regulated interest rate structure Excessive regulations on organization's structure and managerial resources; Lack of focus on profitability Lack of competition Lack of proper Accounting and Risk Management System Lack of operational transparency Excessive support from government
are: Reduction in pre-emption of funds through reduction of CRR and SLR Introduction of prudential provisioning and Capital Adequacy norms. Phasing out the directed credit programmes Deregulation of interest rates Infusion of competition (Entry of Private Sector Banks) Imparting transparency Introduction of universal banking Mergers and Acquisitions Development of technology Emphasis on corporate governance
growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period.
E-Banking
Branch Expansion
Employees Position
Labour Productivity
Branch Productivity
Profitability Ratio
II
Re-engineering Operations
and Pricing Retail Banking Risk Management including regulatory and environmental risks Legal challenges
Harnessing Facilitators
Technology
Issues in identification and cost-benefit analysis