Banking reforms introduced in India in recent times

Some of the steps taken by the government to bring reforms in the banking sector are –

  • The Ministry of Finance in its Economic Survey 2015-16 suggested four R’s – Recognition, Recapitalization, Resolution, and Reform to address the problem of NPAs.
  • The Union Government unveiled plans to infuse 70000 crore rupees in the next few years, but PSU banks would need at least 1.8 lakh crore rupees by 2019-20.
  • In October 2015, the Government announced Mission Indradhanushunder which 7 key strategies were proposed to reform public sector banks (PSBs).
  • In May 2015, the RBI advised all PSBs to appoint an internal Ombudsman to further boost the quality of customer service and to ensure that there is undivided attention to the resolution of customer complaints in banks.
  • The Government announced its intention to introduce a comprehensive Insolvency and Bankruptcy Bill in the Parliament based on the recommendations of the Dr. T K Viswanathan-headed Bankruptcy Law Reforms Committee (BLRC).
  • In order to rein in corruption, the Supreme Court on 23 February 2016 ruled that the top officials and employees of private banks will be considered as public servants for the purposes of the Prevention of Corruption Act, 1988.
  • The RBI is also facilitating rectification of procedural flaws in the system through a number of well-thought-out initiatives like restricting incremental non-performing assets through early detection, monitoring, corrective action plans, shared information, disclosures, etc. In this regard, the RBI’s resolve to clean banks’ books by 2017is commendable.
  • Since 2014, the banking sector has witnessed the adoption of the JAM (Jan-Dhan, Aadhaar, and Mobile) trinity, and the issuance of licenses to Payments Banks and Small Finance Banks (SFBs) to achieve last-mile connectivity in the financial inclusion drive. For instance, SFBs had mobilized deposits of ₹82,488 crores and extended credit of ₹90,576 crores to small and marginal farmers, and MSMEs (micro small & medium enterprises) by the end of FY 2019-20.
  • The government recently announced new banking reforms, involving the establishment of a Development Finance Institution (DFI) for infrastructure, creation of a Bad Bank to address the problem of chronic non-performing assets (NPAs), and privatization of public sector banks (PSBs) to ease its burden in terms of mobilizing additional capital.