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FDI in Retail will affects farmer?

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Financial sector reforms since mid-1991 are part of the overall economic reforms that cover industry, trade, taxation, banking, and financial markets. A decade of economic and financial sector reforms has strengthened the fundamentals of the Indian economy and transformed the operating environment of banks and financial institutions. The sustained and gradual pace of reforms has not led to any major disruptions and has instead fuelled growth. According to the RBI Annual Report 2001-02, GDP growth from 1992-93 to 2001-02, that is, since the initiation of reforms, averaged 6.0% against the 5.8% recorded from 1980-81 to 1989-90, the pre-reform period.

We think the most significant achievement of financial sector reform has been the marked improvement in the financial health of commercial banks in terms of capital adequacy, profitability, asset quality, and also the attention to risk management. Furthermore, deregulation has opened new opportunities for banks to increase revenues by diversifying into investment banking, insurance, credit cards, depository services, mortgage financing, securitisation, etc. At the same time, liberalisation has led to greater competition among banks, both domestic and foreign, as well as competition from mutual funds, non-banking financial companies, post offics, etc.

Nationalised banks dominate the banking system in India. Banks were nationalised in 1969 by then Prime Minister Indira Gandhi. The major objective behind nationalisation was to spread banking infrastructure to rural areas and make cheap finance available to Indian farmers.

With a view to facilitating the gradual convergence of prudential norms for the banking sector with international best practice, commercial banks in India were advised to implement Basel II. Foreign banks operating in India and Indian banks with a presence outside India are required to migrate to credit risk and basic indicators for operational risk standards under Basel II with effect from 31 March 2008. All other scheduled commercial banks are encouraged to migrate to these standards no later than 31 March 2009.

Banking sector

Banking sector-Organisation Chart

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