Emerging Challenges in Indian Banking

M G Bhide, A Prasad and Saibal Ghosh

MPRA Paper from University Library of Munich, Germany

Abstract: The paper examines the process of banking sector reforms in India. It notes the beneficial impact to the financial system consequent upon the reforms and highlights the current weaknesses in the banking system. Against this background, the paper identifies the emerging challenges and discusses ways in which they could be tackled. In order to evaluate the efficacy of the prudential norms, we conduct a stress test of credit risk. Our analysis reveals that, depending on the percentage of loans that graduate into non-performance and the provisioning made, the immediate hit is a loss of interest income between Rs.21-55 billion. The maximum level of additional provisioning that can support the present capital adequacy ratio is determined.

Keywords: banking; non performing loans; corporate governance; india (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2001
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