Search

The Reserve Bank of India, not to be left behind, played its part in this transformational journey, by issuing regulations and recommendations on banking mechanization and computerization. Financial sector in general and banking industry in Particular is the largest spender and beneficiary from information technology. According to John Finnerty, "Financial Innovation involves the design, the development, and the implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance". The various innovations in banking and financial sector are ECS, RTGS, EFT. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to develop a holistic understanding of the state of implementation of the Basel III regulation in India. It offers essential insights related to its impact on the macroeconomy, non-performing assets, capital flows and modifications required for the Indian banking sector. Another central aspect of this study is the identification of challenges faced by bankers in implementing Basel III in India. Design/methodology/approach: A survey was conducted with the help of a well-structured close-ended questionnaire. It was based on six themes identified after a comprehensive review of the literature. Seven experts validated the construction of the questionnaire. A total of 18 responses (42.8%) were received. Findings: The findings substantiate the importance of Basel III regulations. Although high costs and roadblocks are involved in its implementation, yet, the benefits are notable. Banking experts sense the necessity to modify the Tier 1 ratio, risk-weights and ratings. It is felt that credit ratings will impact the capital and investment flows received by India. Research limitations/implications: The number of responses limits the ability to conduct several statistical tests. Practical implications: The findings support the industry's view that Basel III focuses more on industrialized countries and that many emerging countries lack the technology and infrastructure to implement it. Originality/value: Since the implementation of Basel, the norm is a continuous process; the findings provide vital insights to regulators and academicians focusing on the Indian banking sector about its current state to aid in developing a future roadmap. This paper delivers important values as follows: a holistic view of banking experts on Basel III in India, required modifications, its impact and future scope of research in this area. [ABSTRACT FROM AUTHOR]

The paper examines Peer to Peer (P2P) lending in India, its growth and the way lending platforms have fared following the introduction of regulations by Reserve Bank of India. The paper analyses the transaction practices of these lending platforms, their margins and makes a comparison with the micro finance model of lending. The paper observes that there was an increase in the number of platform-based lending entities from 2010 to 2017. Subsequently, the growth of peer to peer lending platforms has been subdued following regulations introduced by the RBI. The paper finds that their operations belie their claim of being transparent. The desired lower cost to borrowers is yet to be witnessed in this novel segment of lending. [ABSTRACT FROM AUTHOR]

This paper explores the different insider employee-led cyber frauds (IECF) based on the recent large-scale fraud events of prominent Indian banking institutions. Examining the different types of fraud and appropriate control measures will protect the banking industry from fraudsters. In this study, we identify and classify Cyber Fraud (CF), map the severity of the fraud on a scale of priority, test the mitigation effectiveness, and propose optimal mitigation measures. The identification and classification of CF losses were based on a literature review and focus group discussions with risk and vigilance officers and cyber cell experts. The CF was analyzed using secondary data. We predicted and prioritized CF based on machine learning-derived Random Forest (RF). An efficient fraud mitigation model was developed based on an offender-victim-centric approach. Mitigation is advised both before and after fraud occurs. Through the findings of this research, banks and fraud investigators can prevent CF by detecting it quickly and controlling it on time. This study proposes a structured, sustainable CF mitigation plan that protects banks, employees, regulators, customers, and the economy, thus saving time, resources, and money. Further, these mitigation measures will improve the reputation of the Indian banking industry and ensure its survival. [ABSTRACT FROM AUTHOR]

Banking regulations intend to protect the interest of depositors, reduce the risk of bank failures, minimize the moral hazard, and strengthen the financial stability by controlling the behaviour of financial system participants and by building financial buffers. In countries like India, where banks dominate the financial sector, banking regulations assume added significance. This paper provides a global perspective on the prudential regulations and examines the extent to which the regulations could mitigate the risk of financial crises. It also analyses the role of macro-prudential regulations in achieving financial stability and its interaction with micro-prudential regulations. It further delves into the role of regulations in catalyzing financial innovations and hence, indirectly contributing to irrational exuberance and excessive risktaking in the financial system. Certain other issues deliberated upon in this paper include a need to closely look at the nature and design of prudential regulations with a view to reducing complexities in regulatory and supervisory processes, and evaluation of the role of regulations in growth, governance, and performance of banks in India. The paper looks at the movement of credit to GDP ratio, the GDP growth trajectory, and a periodic emergence of credit gap in the Indian context, and discusses the utility of credit gap as an indicator for macroprudential policy in India. This paper also analyses the pattern and movement of gross and net NPAs of the Indian banks and its relations with regulatory forbearance and supervisory processes. It suggests a continual need for strengthening institutional credibility for improving the effectiveness of regulatory and supervisory processes so as to achieve stability, transparency, and robustness in financial institutions and financial markets. [ABSTRACT FROM AUTHOR]

In recent years there has been increasing interest in the rise of shadow banking in China and India. In this paper, we aim to get a better understanding of the differences in trends and investigate the factors leading to the increase of shadow banking in these two major emerging economies. We find that financial exclusion is a common factor leading to the growth of shadow banking in both countries. While financial reform has taken place in India, financially repressive policies still prevail in China. Although several regulatory measures have been adopted in India and China, the size of the shadow banking sector in these two countries remains underestimated. Thus, streamlining and enhancing data collection is a key priority for both nations. We argue that regulation in both countries should be more activity focused (specific field in which a shadow bank is focused on) rather than sector or entity based, and it should be at par with banks. The shadow banks provide last mile connectivity to remote, distant, and ignored segments of the population not serviced by the formal financial sector. As this enhances financial inclusion, a balanced approach is required keeping in view both costs and benefits of the shadow banking system. [ABSTRACT FROM AUTHOR]

The capital requirements for credit risk, market risk and operational risk are laid down by Basel III which is the international capital adequacy structure for banks. Basel III is the third of the Basel Accords suggested on banking laws and regulations issued by Basel Committee on Banking Supervision in order to augment the banking regulatory framework over Basel II. Criticism has been faced by the Basel I Accord due to its focus on principally credit risk. A New Capital Adequacy Framework (popularly referred to as Basel II) has been proposed by Basel Committee incorporating three major elements: (a) minimum capital requirements, (b) supervisory review and (c) market discipline. A further modification in 'Basel III' was initiated in 2010 in response to a number of failings in Basel II, which came to light during the crisis in since 2008. The Basel III is to be implemented by banks in India as per the guidelines issued by R BI from time to time. This paper briefly describes the implications and issues of Basel III Norms in Indian banking sector. This study is based on the secondary data which has been collected from annuals reports of RBI, journals and various websites. [ABSTRACT FROM AUTHOR]

This paper is a write up on the recent Banking Regulation (Amendment) Ordinance, 2017, which is yet another step in a series of initiatives taken to resolve stressed assets in the Indian banking system. An ordinance to this effect was promulgated over a “bad bank” idea as such an entity would itself be a warehouse of stressed assets and not a resolution mechanism. The paper provides an overview of stressed assets, aim of the ordinance, immediate steps taken by RBI after the promulgation of ordinance, and the looming questions that still remain pertaining to resolution of stressed assets. [ABSTRACT FROM AUTHOR]

This paper investigates the association between Capital Adequacy Ratio (CAR) (as set by the Reserve Bank of India in line with Basel Committee on Banking Supervision [BCBS]) and the credit risk of Indian commercial banks. The data for the study is a set of balanced panel of 43 (25 public sector and 18 private sector) banks for the period 1996-2016 which are triangulated from various secondary sources. The dependent variable credit risk is proxied by two measures, viz., Credit-Deposit Ratio (CDR) and Net Non-Performing Assets to Total Advances (NPA_TA). The independent variable is measured by the CAR as prescribed by the Basel norms. Apart from CAR, some bank-specific and macroeconomic variables are also used as predictor variables, namely, profitability, bank size, revenue diversification, liquidity, managerial efficiency, economic growth and inflation. With the help of panel data regression, the study reveals that when CDR is taken as a measure for credit risk, a positive association between CAR and credit risk exists, as against the model when NPA_TA is taken as a measure of credit risk where a negative association is observed. This implies that the regulatory capital positively impacts the quantum of lending operation of the banks as well as the quality of such lending. It is therefore inferred that banks have been undertaking risk set off measures in order to comply with the regulations and sustain a balance between profitability and stability. Moreover, it is observed that the different risk measures used to represent credit risk also have a bearing on the results. [ABSTRACT FROM AUTHOR]

Banks in India are facing the problem of non-performing assets (NPA), for which a credible solution is yet to be found. The gross NPA increased by 23% between 2005-2016. The Reserve Bank of India, the central bank of the country, and the Government of India are considering alternative approaches to reduce the NPA level. In May 2017, the Government gave more power to RBI's Oversight Committee through an ordinance. This paper reviews literature related to management of stressed assets to discuss the feasibility of the ordinance to reduce the NPA level in India. An attempt is made to review the approaches adopted to define and manage the NPAs and to review the relative effectiveness of the approaches to recover NPAs. [ABSTRACT FROM AUTHOR]

As commercial entities, commercial banks are expected to maintain profitability in the face of stiff competition, while serving the mandatory government priorities and policy commitments, and central bank regulations. The performance of commercial banks crucially depends on their technical efficiency of realising the full potential output, which the banks invariably do not. This paper measures the technical efficiency of 94 public, private, foreign, and small financial commercial banks in India in 2019 using the data envelopment analysis (DEA) method; the determinants of technical efficiency are analysed by applying the Tobit regression method. The estimated technical efficiency scores of public sector banks are below average and private banks do little better than average, while the technical efficiency of foreign banks varies widely. The Tobit estimates show that capital adequacy and return on assets positively influence technical efficiency, while bank size reduces the technical efficiency of the banks. The managerial quality, bank profitability, and diversification are irrelevant to the technical efficiency levels of commercial banks. The results suggest that the performance of commercial banks in India may be improved by choosing a proper input-output mix and an appropriate scale size. [ABSTRACT FROM AUTHOR]

High customer interaction is required in the banking industry, making emotional intelligence an indispensable skill for bankers. The aim of this study is to examine the relationship between emotional intelligence and work satisfaction amongst banking professionals in India. While a myriad of studies have been conducted on emotional intelligence in the banking industry, there have been very few in the Indian setup. After conducting the primary study and collecting data from 600 professionals in India's banking sector, the outcome reveals that both emotional intelligence and work satisfaction are significantly related to each other. The findings indicate that the higher the emotional intelligence among employees, the higher their work satisfaction. Banks are part of the service industry and must comprehend customer requirements, aspirations, and ambitions in order to establish a good perception among customers. Banks should invest in a robust customer relationship management technology that enables them to comprehend their customers' desires when engaging with them, allowing them to cross-sell various offerings based on demand. Human capital is critical in ensuring the banking sector's growth and continuation. That is why high emotional intelligence among banking professionals is necessary for the banks to be successful in achieving customer satisfaction and retention. [ABSTRACT FROM AUTHOR]

Owing to increased banking regulation and competition, banks are facing challenges to maintain their profitability. This article studies the affect on profitability of banks' internal factors and external economic factors. The evidence shows that liquidity risk has a significant negative affect on profitability of the PSU banks. Also operational risk and capital efficiency have a significant negative impact on profitability. Return on assets, bank size, and economic growth rate are found to influence profitability negatively; only the affect of the former was statistically significant. Increase in nonperforming assets adversely affects profitability. [ABSTRACT FROM AUTHOR]

The article comments on emerging issues related to central banking in India, with reference to former governor of the Reserve Bank of India (RBI) C.D. Deshmukh's lecture in 1948 on "Central Banking in India – A Retrospect," which was delivered in the backdrop of differences between Government and RBI on nationalisation of Reserve Bank. Topics include the RBI was also given the power to regulate commercial banks after the failure of several banks at that time.

The Basel Accords primarily focuses on prudential norms for bank capital under the aegis of which banks are required to ensure adequate capital to cover losses on account of significant risks in their business. Banks use deposits and borrowings for commercial and investment banking business. These two liabilities together form more than 90% of the total liabilities of a bank. Due to this, banks are considered as highly leveraged lending institutions. Further, on account of deregulation of the markets, banks are exposed to market risk in their commercial and investment banking business. Therefore they need to have adequate capital proportionate to risk. In the past banks maintained capital as per the provisions contained in the Banking Regulation Act of 1949. At present the Reserve Bank of India (RBI) has prescribed a capital adequacy ratio i.e. capital risk asset ratio (CRAR) under the Basel Accords. The capital of a bank must have a relationship with the risk it takes. This article is an effort to review the Basel Accords with regards to bank capital and liquidity ratios and its implications on the banking business. [ABSTRACT FROM AUTHOR]

Banks in India have been gone through structural changes in the last three decades. The prices that bank charge depend on the competitive levels in the banking sector and the risk the assets and liabilities carry in banks' balance sheet. The traditional Lerner Index indicates competitive levels. However, this measure does not account for the risk, and this study introduces a risk-adjusted Lerner Index for evaluating competition in Indian banking for the period 1996 to 2016. The market power estimated through the adjusted Lerner Index has been declining since 1996, which indicates an improvement in competitive condition for the overall period. Further, as indicated by risk-adjusted Lerner Index, the Indian banking system exerts much less market power and hence are more competitive contrary to what is suggested by traditional Lerner index. [ABSTRACT FROM AUTHOR]