Chapter II
REVIEW OF LITERATURE
18
CHAPTER II
REVIEW OF LITERATURE
In Modern times banking is the kingpin of all business activity. It is an
important instrument of mobilizing the community’s resources through
institutional framework. As a matter of fact, economic and industrial
development of a country depends, is the main, upon how efficiently funds
are managed by the banks.
The Indian financial system comprising the commercial banks, the
financial institutions and the capital markets, has undergone a very rapid
transformation since the reforms were implemented in 1991. Many studies,
have attempted to analyze the role of banks and the development of economy
in general and on the aspects of financial sector reforms implemented in India
since 1991. Some of these studies have been reviewed here which shows what
happen to Indian banking sector in the past and where it stands at present.
To study the organization framework for the implementation of social
objectives of banks, a study group headed by Gadgil D.R. (1968)1 was
appointed. It recommended that commercial banks should give more
importance for lending to priority sector including agriculture, small scale
industry and small business units.
19
A study conducted by NIBM (1969)2 stressed the need for banks to
adopt such techniques which will attract and induce more depositors and to
provide service to them.
For the development of banking operations into the unbanked areas
and also for implementing branch expansion programmes a committee headed
by Nariman F.K.F (1969)3 was appointed. This committee’s
recommendations resulted in the implementation of Lead bank scheme.
According to the study conducted by NCAER (1969)4, majority of the
depositors are interested in depositing their savings on non-banking
institutions rather than other banks because of their higher rate of interest on
their deposits.
Sharma B. P (1971)5 highlighted the rule of commercial banks in the
developing economy as well as the need for the diversification of banking
services so that it would be more useful for the public.
The establishment of state-sponsored rural commercial banks to meet
the credit needs of rural people was recommended by the working group on
rural banks (1972)6.
The banking commission (1972)7 headed by Saraiya R.G,
recommended for the modernization of operating methods of commercial
banks.
20
Ooman M.A (1976)8 made a study on Rise and Growth of banking in
Kerala. This study was focused on the whole history of Kerala banking
starting from pre-independence to post-nationalization.
Basu (1976)9 analyzed the determinants of inter district disparity in
outstanding credit of commercial banks and level of per-capita deposit
strength of co-operative credit movement and the degree of urbanization on
such disparity.
Improvement of operation efficiency and profitability was
recommended by the Luther Committee (1976)10. The committee
recommended for the uniform transfer price formula for the service charge
structure.
Gopal Karkal (1977)11 made his study on the problems and difficulties
of rural and urban bank customers and suggested for the adoption of new
innovative technology by the banks to meet the growing needs of various
customers.
The major changes developed in the banking sector after the
nationalization was studied by Ghosh (1979)12 and focused that many
improvements had happened in the case of Deposit mobilization, lending
pattern and operational efficiency of banks.
21
According to the study of Agerval H.N (1979)13, improved service can
be provided to the customers only by changing the organizational setups of
banks and also with the adoption of new management techniques.
Economic Research Division by Birla institute of scientific research
(1981)14 evaluated the comparative performance of public sector banks and
major private sector banks after nationalization and focused that performance
of public sector bank was not as expected.
V. C Kulshrestra (1986)15 has conducted a study on “The role of lead
bank scheme in branch expansion” in western region of Uttar Pradesh and
found that lead banks in western Uttar Pradesh and other parts of the country,
has laid emphasis on branch expansion at mass scale with major thrust in
unbanked areas.
Santhosh Pai (1986)16 conducted a study on the Lead bank scheme and
branch expansion and found that branch expansion of banks were very slow
and far from satisfactory.
A study was conducted by NIBM (1986)17 on the banking activities
and found that only educated people are approaching the banks and
recommended that banks should come forward to help the lower income
people of rural areas.
22
Naidu (1986)18 assessed the impact of bank finance on income and
employment of weaker sections in India. The study proved that bank finance
is having a high degree of impact on income and employment.
Mishra (1987)19 studied about the credit facilities provided by the
banking institutions in rural development and found that rural financing by
the banks are not satisfactory.
Ramachandra Kittur (1988)20 suggested in his study that when
commercial banks entered into field of agriculture lending they should act as a
catalyst. Their role should be one of social and another of commercial
responsibility. If the banker guards himself against external force so far as
‘equality and monitoring of advances’ is concerned, it is socially and
commercially viable to finance agriculture and allied activities.
The Khushro Committee (1989)21 observed that the Reserve Bank of
India has actively involved in institution building of rural credit and was
successful in its endeavor to promote a sound and balanced growth of
commercial credit movement. The committee further opined that the Central
Bank has a wide area of direct responsibility in policy formulation in regard
to credit deployment for commercial banking system.
Narasimham (1989)22 emphasizes the importance of an administrative
type of regulation which would affect the innovative character of Indian
Banking. The banking system is safe with RBI which decides the manner and
23
extent of regulation. However it is reminded that the ownership of the bank
does not give the proprietor the right to interfere in the management. More
authority should be given to the managers of the bank subject to regulation by
RBI.
Syed Sharafat Hussain (1990)23 points out that the instruments of
savings Mobilization should be fabricated so as to resolve the various types of
synchronization facing an individual.
Paduval (1991)24 discusses the Indian experience of liberalization
during last two decades and likely scenario in the next decade. He observed
that the past two decades showed that growth of financial system was
characterized by active state intervention as with a view to building up of
institutional infrastructure. However a marketing approach has to be adopted
to face the challenges of management arising due to high degree of
diversification. To face this, banking system should be made financially
strong.
Shankar (1991)25 opined that the conditions of entire nationalized
banking industry is shaky. After 20 years of nationalization the banking
system is like a vehicle which has been running hard to fulfill the government
policies and programmes. The RBI should spill out clear, broad objectivities
and general guidelines to banks but detailed policy, strategies planning and
operational freedom should be left to the bank.
24
Ramola and Negi (1991)26 examined the growth of and development of
commercial banks in the rural development process. The observation was that
“Banking industry in India has made a significant progress in extending credit
facilities in the rural sectors”. The rate of priority sector advances to net bank
credit has risen, but cases are some times recommended by the sprawling
agency for unproductive activities with the result that beneficiaries close
down the business even before completion of gestation period.
Rajendra Naidu (1992)27 studies the deposit mobilization efforts by
commercial banks and obstacles faced by them. He concluded that since
nationalization, the policy focus has been centralized mainly on lending to
neglected sector rather than deposit mobilization. Competition, interest rate
structure, lack of good customer service, staffing problem, advertisement and
publicity are the hurdles the banks had to cover in its effort of deposit
mobilization. RBI should take steps to reduce unhealthy competitions.
Pandya, Patel (1992)28 observe on banking for Rural development.
Rural branches should be managed with officers and clerks who are
experienced and exposed to rural development. They should not work in
isolation, but work very closely with semi urban/urban branches to ensure
proper and timely assistance to the needy rural people.
Sree. Rama Murthy and Hareesh (1993)29 attempted to explain the
reason for inter-regional disparities by examining regional variation in per
25
capita income levels. The results imply that the region with high income and
intense spread of branches have high per capita branch deposits. While
regions with low income level and less spread of branches have low per
branch deposits.
Jayakumar has conducted study(1993)30 with the objective of making a
comparative examination of the performance of public sector banks and
private sector banks in Kerala.It reveals that the private sector banks are doing
well in Kerala.
S. Doreswamy (1993)31 emphasis on the operation and rapport that
must be fostered among the banks, to prepare themselves to face the new
challenges. This study suggested some ideas about how best and in which
areas inter-bank co-operation could be fostered for the benefit of entire
banking industry.
J. V. Shetty (1993)32 made a study on the impact of liberalization and
de-regulation in the context of financial sector reforms and suggested that it is
imperative that banks should have self regulatory system of specifying and
accordingly achieve the objective of improvement in productivity.
Sanjay Kumar Arora and Rajat Khater (1994)33 had made an empirical
study on the increasing NPAs and Depleting profits. It also analyzed the
impact of increase in NPAs to reduce the profitability of banks and opinioned
26
to adopt more comprehensive credit appraisal system, strengthen the post-
credit monitoring methods and to review the performance of NPAs regularly.
A.K. Sarkar (1994)34 attempted to exhibit the application and
implications of the reform measures that have been already implemented. It
evaluated the reforms implemented in NPAs, Capital adequacy norms, change
in SLR and CRR and entry of new PRSBs.
Kulkarni (1994)35 suggests measures for tackling the emerging
competitive environment. We should become highly responsive and user
friendly organization. Benefit cost analysis is necessary in every bank to
measure profitability.
Anand (1994)36 intended to highlight that priority sector lending by
commercial banks is being wrongly maligned in the light of Narasimham
Committee report (1991). He viewed that we are made to believe that priority
sector lending has been undesirably a static and a dying concept. Accordingly
priority sector lending in a developing economy is indeed a dynamic
phenomenon. What is required is to be alive to this dynamic phenomenon and
keep on reviewing the priorities vis-à-vis the present day development
banking scenario.
Gupta (1994)37 analyzed the challenges faced by the bank. Efforts are
being made by the government and Reserve Bank of India to bring about
fundamental changes in the working of financial system. Public sector banks
27
should get ready to face competition from private sector, domestic and foreign
bank in the area of customer services. Cost of funds, technological innovation,
internal control and motivation of staff and risk and asset management. The
Reserve Bank of India should strengthen the supervisory machinery and at the
same time ensure that enough freedom is given to banks to operate within the
prescribed rules and regulation.
Gurumurthy (1994)38 highlighted the recent trends in commercial
banking and observed that the policies of banking reformation have touched
upon the area of lending pattern, interest rate, Non-performing Assets, Capital
adequacy etc. He also stressed the need for directing these reforms towards
encouraging bank employees, defining their responsibilities and authority.
Employees enthusiasm, involvement and initiative should be improved.
Godse V. T (1994)39 reviews the growth of banking since 1969 and
foresees the performance in 2000. According to him banking industry has a
track record of success for past two decades and it has risen up to the cause of
nation building. What is needed now is a systematic pro-active approach
towards the management of change. Integration of various sub systems like
organization, people, technology, business can pave way to attain the desired
result.
Kaveri (1994)40 highlighted the issues in credit management in banks
and of increasing overdues and ways to tackle the problem. Overdues should
28
be reduced by effective recovery measures and each bank should consider that
current year as ‘Recover Year’. Targets should be fixed for each branch and a
‘task force’ to plan and monitor the recovery should be set up. Recovery
officers should be appointed in each branch and awareness among staff
should be created.
Raja Gopalan Nair, (1994)41 in his doctoral thesis, has made an attempt
to evaluate the service offered by the banks in rural areas and to examine the
diring needs of rural customers in Kerala. The study recommends that rural
branches should pay attention to popularize the ancillary banking services in
the rural areas of the state.
Ammannayya (1995)42 tried to highlight the importance of Human
Resource Management in banks. He was of the view that the banks should
recognize their Human Resource Management strategies and see that they
adopt a pro-active Human Resource Management system in the place of the
present traditional methods. Banks should also adopt strategic planning and
the performance budgetary system should be integrated with the strategic
planning process.
Patel (1995)43 has made valuable suggestion to substitute weak banks
and to make financial institution more competitive. This can be effected by
developing a group of competent and professional managers, freedom,
effective supervision and sufficient training.
29
Upaulthus Selvaraj (1995)44 in his analysis of the status of banks
before and after nationalization observes that prior to nationalization bank
liquidation was rampant through out the country due to speculative
tendencies, frauds and scandal by directors of concerned private sector. The
nationalization process played a key role in improving the rate of savings and
encouraged the economic growth. The growth of banking sector was achieved
by high mobilization resources, deployment of credit to wide spectrum of
activities and building up of an efficient infrastructure.
Ghoshroy (1995)45 commended on the challenges before the
commercial banks a the pressure on profitability, recovery and reduction of
Non-performing assets, intense competition; phenomenon of globalization,
management of information technology; Human Resource Management ,
rising expectation of customer and capital restructuring.
Sarma (1995)46 on an analysis of the working of a few banks found that
the interest earnings have came down when compared to previous years and
interest expenses have also due to fall as interest rates on deposits were
reduced during the first half of the year. Operating expenses could be
contained by most banks within the interest spread available. Another
important concern is lower percentage of other income as proportion to
working fund.
30
Rangarajan (1996)47 stressed that objective of banking sector reforms
has been to make the banking system more resistant to face the competition,
strengthening the safety and soundness of banks, capital adequacy,
consolidated supervision. Inspection system focusing on capital adequacy
asset quality, management, earnings, liquidity and systems (CAMELS) model
should be vitalized.
Nanjundappa (1996)48 opined that the Indian banking system is on the
threshold of another revolution including financial sector reforms that are
aimed at improving the productivity and efficiency of the system as a whole.
He highlights some of the issues like social responsibility, commercial
functioning, asset classification, reduction of Non performing assets, income
recognition and threats of unbridled new private and foreign banks entry.
Chidambaram (1996)49 throws light on the importance of Total Quality
Management (TQM) as applicable to banks. TQM is a set of tools, principle
and procedures that provide guidance in the practical aspects of ensuring
quality services. It is built on principles of customer focus, quality, continuous
improvement and involvement of all personnel. It aims at contended
customers, empowered employees, increased revenue and reduced non-
interest expenses. TQM reduces internal competition, foster team work,
improve decision making and reduce costs and there by makes bank’s lending
more purposeful.
31
Rangarajan (1996)50 viewed that the first phase of banking sector
reforms concentrated on such factors as pre-emption, interest rate structure,
prudential norms and supervisory over sight. The second phase should lay
stress on the improvement of the organizational effectiveness of banks for
which the initiative has to come largely from bank themselves.
Shetty (1996)51 recommended that ‘banks will have to specialize in
their operation to stay afloat in today’s competition. Specialization will have
to be considered for undertaking forex business, agriculture consultancy and
allied activities, Venture capital financing and industrial financing.
The aegis of the committee of economists (1996)52 headed by Shri. B.
B Shetty undertaken a study with the objective of examining the patterns
banking development in the selected East and South-East Asian nations, the
experiences of which could be relevant for the Indian banking and help
individual banks in strategic formulation. The study team visited various
banks in South Korea, Republic of China, Indonesia, Malaysia and Thailand
and held elaborate discussions on the functioning of banking institutions, the
impact of reforms and the responds mechanism adopted by them. It revealed
that all these countries had uninterrupted economic growth rates, advanced in
respect of financial systems and the degree of financial intermediation.
Kanta Ahuja (1996)53 made a study on the progress and developments
had to the Indian banking sector after the reforms. It focused mainly on the
32
operational aspects of banking profitability and performance. It revealed that
the progress made by the Indian banks during the period of reforms where
satisfactory mainly in the areas of operational efficiency, NPAs and
profitability.
P. N. Joshi (1997)54 conducted an analysis on the major achievements
in the banking sector during the reforms period and opinioned that if the
initiatives of the banks and supportive measures by authorities move in
tandem, the customers expectation of better and efficient banking service will
be materialized.
Prashanta Athma, Augustine L Gavini (1997)55 made a study to assess
the deposit holders level of satisfaction services offered at the various
branches of State Bank of Hyderabad and solicit their suggestions to improve
customer service. The study reveals that depositing of cash, collection of
cheques and updating of pass books are the areas of customer satisfaction.
P. B. Kulkarni (1998)56 attempted to present a broad view of Indian
banking, and also studied about the operational implications of various
recommendations of suggested priorities to get our banking sector firmly on
its feet.
Asli Demirgue – Kunt and Huizinga (1998)57 made an investigative
study regarding how bank interest spreads are affected by taxation, the
structure of the financial system and financials regulations such as deposits
33
insurance. The result of the study indicates that bank characteristics macro
indicators, implicit and explicit financial taxation, deposit insurance, overall
financial structure and the legal and institutional environment all significantly
affect bank interest and profitability.
M. R. Das (1998)58 attempted to estimate the influences of various
factor on ROE of the Indian Public sector banks, for which, the return on
equity has emerged as a significant performance indicator in the post-reform
era. The pooled data for this study divided the 26 public sector banks into two
groups, viz, ‘Larger’ banks and ‘Smaller’ banks on the basis of their assets.
This study found out that the importance of interest income and interest
expenditure in determination of ROE is gradually diminishing and operating
expenses placed an important role in depressing ROE more for the ‘Smaller’
banks than the ‘Larger’ banks. It also showed that balances with RBI, Money
at Call and Short notice are playing a significant role in boosting ROE, and
for ‘Smaller’ banks, the impact of investments turns out to be adverse than
expected.
P. R. Ravi Mohan (1998)59 attempted to underpin the strategic
importance of performance appraisal for Indian banks in achievements and
sustaining core competencies. This study opinioned that proper integration of
performance appraisal system into strategic management considerably
34
enhances the credibility of the very system and will pay rich dividends for the
Indian banking system in the times to come.
K. G. K Subba Rao and V. C Augustine (1998)60 analyzed the portfolio
behaviour of commercial banks in the changing scenario consequent to
financial sector reforms and revealed that the portfolio behaviour of
commercial banks has undergone radical changes with the induction of the
financial sector reforms, with relatively low credit-deposit ratios in the post-
reform period, compared to those in the preceding years.
S. S. Tarapore (1998)61 strongly argues for the need for second
generation banking sector reforms based on the experiences and achievements
had during the first phase of reforms. The first phase of reforms were
critically evaluated and its strength and weaknesses were discussed and
wanted to have the second generation banking reforms with a strong motive
for the better performance of the banking sector.
Ramesh Gelli (1998)62 examined the rigidities that persists in the
banking system, among the various components of the financial sector and
viewed that the success of the financial sector reforms depend upon
financially healthy institutions with adequate skills to respond the changing
policy framework, economic conditions and market competitions.
Nirupam Bajpai and Jeffrey D Sachs (1999)63 studied on the progress
of various states in India after the economic reforms were implemented. It
35
reveals that reforms at the state level have a substantiate unfinished agenda.
While some state have demonstrated their commitment by implementing
reforms in certain sectors of economy, a majority of them have still to initiate
any significant policy changes. However the reform oriented states have
performed much better than other states.
James A Hanson, Sanjay Kathuria (1999)64 made a study on the
Indian’s financial system. This study was mainly focused on the challenges
and issues on the Indian financial system and the reforms that would help to
deal with them. It also considered the issues related to capita market,
challenges posed by financial instability and global financial integration.
D. P. Khankhoje (1999)65 studied about the present strength and
weaknesses of rural banking system in our country and suggested measures to
improve the banking facilities for the rural population and opinioned that
what is really needed in this context is cross fertilization of ideas, technology
skills, banking procedures and practices between rural and urban sectors.
Ganti Subrahmanyam (1999)66 made a critical evaluation on the first
Narasimham Committee recommendations in 1991 and its impacts on the
banking sector. He also made a attempt to evaluate recommendations on
Narasimham committee II in 1998 and its possible impact on the banking
sector of India.
36
N. B. Shete (1999)67 made the study to give the historical
developments and various facts of the bank credit to priority sector. Various
dimensions of the bank credit to the priority sector including the recovery
aspects have been analyzed statistically. The impact of banking sector reforms
on the priority sector lending was also analyzed. It revealed that there has
been reversal of trend of the ratios of the priority sectors to the net bank credit
and the portion thereof going to agricultural sector.
Pradeep Srivastava (1999)68 focused on the questions related to Indian
banking. Are bigger banks better for cost minimization? And have financial
reforms made Indian bank more efficient. The analysis shows that all banks in
India operating below cost scale, including public sector banks. The findings
suggest that any effective distancing of the government from the ownership,
management and operation of Indian banking would lead to considerable
activity in mergers and acquisitions in this sector.
D. P. S Verma and Ruchika Vohra (2000)69 seeks to identify the major
features, which determine the service quality in banks and also spells out the
implications of the findings for the banks based on service results. The study
revealed that majority of the customers perceived punctuality in opening of
the bank account as the most important feature, closely followed by accurate
record keeping and prompt services.
37
D. Narayana (2000)70 attempted to analyze the trend in credit
deployment by industry, by bank group, by rural and urban area and by the
states over the recent periods. The study shows that, the post-reform banking
trends are slowly reversing the trends of two decades since nationalization.
The liberalization of banking has aggravated the imperfections in the credit
market and resulted in the decline of lending to agriculture, small enterprise
and such activities.
V. K Ramachandran and Madhura Swaminathan (2001)71 conducted a
study to describe and evaluate rural credit policy in India over the last three
decades and examined its effects on rural workers at the level of single
village. This study found that a significant expansion and consolidation of
banking infrastructure in rural areas and correspondingly, a rise in the deposit
mobilization and advances in rural areas after nationalization.
Narinder Kaur and G. S. Batra (2001)72 made a attempt to study the
banking sector reforms and its policy implications. This study throws light on
financial performance of commercial banks, NPAs, capital adequacy and
overall impact of reforms.
A Gnanadoss (2001)73 focused the services of banking operations to
the priority sector besides reviewing the organizational perspective and the
spheres of the services rendered to the priority sector. The study stressed the
need for a critical role to be played by the banks, especially in respect of
38
Agriculture, small scale industries and other priority sectors which cannot
have access to the capital market directly.
P. Ganesan (2001)74 examined the determinants of profitability of
public sector banks in India by an empirical estimation of profit function
model which showed that interest costs, interest income, other income,
deposits per branch, credit to total assets, proportion of priority sector
advances and interest income lost are the significant determinants of profits
and profitability of Indian public sector banks. The average establishment
costs positively contributes to the profitability but it adversely affect the net
profit of the public sector banks.
M. L. Pagaria and Dr. Ram Jass Yadav (2001)75 attempts to highlight
some of the ways by which rural loss making branches can improve
profitability. These includes action plans to improve deposits mobilization,
business development, management of NPAs, improving share of high return
advance and appropriate HRD. It has been observed that improper product
mix, high NPAs, credit-deposit ratio of over 100 percent, lack of team sprit,
inadequate follow-up are the major factors responsible for making losses in
the rural branches.
Deepti Baslas and Anand Bansal (2001)76 foresees that in the years to
come banking industry is likely to be governed by the potential forces of
information technology, merger and acquisition and universal banking. The
39
study also evaluated the impact of all major reforms implemented in the
banking sector.
K. Sham Bhat, V Nirmala and n. Ranjani (2001)77 made an attempt to
examine critically the financial sector reforms since 1991 and its impact on
major indicators on the banking sector. The study reveals that reforms have
contributed to an improvement in banking sector indicators such as number of
banks, number of branch offices, deposits, investments and priority sector
advances of commercial banks.
Dev Raj (2001)78 has analyzed the need for the banking and financial
sector reforms in India and viewed that to have a cohesive and strong
financial system capable of responding to changes in the economy, it becomes
important to have a dynamic autonomous and profitable financial system.
S. N. Misra and Sriram Misra (2001)79 evaluated the development of
commercial banking under the financial and banking sector reforms. The
study revealed that, in all important areas, there was considerable
improvements after the reforms have been implemented.
M. G. Bhide, A. Prasad and Saibal Ghosh (2001)80 examined the
process of banking sector reforms in India. It notes the impacts to the
financial system consequent upon the reforms and highlights the current
weaknesses in the banking system. The analyzes reveals that depending on the
40
percentage of loans that graduate into non-performance and the provisioning
made, the immediate hit is a loss of interest income between 21-55 billion.
Sayuri Shirai (2001)81 assessed whether the reform has been successful
so far in restructuring public sector banks, and if so, what element of the
programmes have contributed. It reveal that as the result of reforms, the
number of banks increased rapidly and entry deregulation was accompanied
by progressive deregulation of interest rates on deposits and advances.
Vrinda Kamat (2002)82 analyzed the financial sector reforms taking
place over the last decade and the impact of deregulation on the capital sectors
and performance of Indian corporate. The important findings of the study
revealed that there was an increase in the profitability of banks in the early
period of reforms but it is slowed down in the later period. It also found that
there is no definite correlation between banking sector reforms and bank
borrowings but there is a positive correlation between profitability and
proportion of debt.
K. P. Mani (2002)83 evaluated the performance of commercial banks in
Kerala in the light of reforms implemented and focused on the new challenges
ahead in the banking sector of Kerala. The study revealed that, in the deposit
mobilization the states performance is relatively better while in deployment
side it is weak bringing down the CD ratio to a lower level.
41
Pramod Kumar (2002)84 examined the circumstances which compelled
India to take ‘U’ turn from the celeberated policy of nationalization of banks
in 1964 to providing an atmosphere where financial sector could operate
freely.
E. M. Thomas (2002)85 made an analysis of the trends in the CD ratio
of public sector banks in Kerala and found that CD ratios of public sector
banks in Kerala is much lower than the all India average.
Abdul Shaban and L. M Bhole (2002)86 examined state wise
determinants of different types of deposits of scheduled commercial banks in
India during 1972-95. The study showed that state income, bank offices and
bank advances have been major determinants of bank deposits in almost all
states and at the national level. However, the elasticity of bank deposits with
respect to bank advances and bank offices has been higher in economically
developed states than underdeveloped states and interest rate has been an
insignificant determinant of total bank deposits.
P. D Jeromi (2002)87 studied the progress of commercial banking in
Kerala in terms growth of deposit and credit and analyzed the trend in CDR in
the state and also its inter-state comparison is done. The study revealed that
commercial banks in Kerala gives more thrust to deposit mobilization than
credit expansion. It also shows that there has been drastic decline in the CDR
in Kerala. Among the southern states Kerala has the lowest CDR. The study
42
also indicated that some nationalized banks performance was poor as their
combined CDR was lower than the state average.
Robin Burgess and Rohini Pande (2002)88 evaluated the impact of rural
branch expansion on rural development by combining differences across
states in initial financial development with changes in license regime and
suggest that banking of rural India transformed production and employment
activities and lead to reduction in poverty and increases in output.
Patra M. D (2002)89 suggested that several fundamentals must come
together in order to make the Indian banking system stronger, efficient and
low cost like strengthening of prudential norms and market discipline,
adoption of international bench marks as appropriate to the Indian situation,
management of organizational change and consolidation with in the financial
system and human resources development as the catalyst of the
transformation.
Mohan R (2002)90 stated that significant transformation of the banking
industry in India is clearly evident from the changes that have occurred in the
financial markets, institutions and products. While deregulation has opened
up new vistas for the banks to augment revenues, it has entailed greater
competitions and consequently greater risks. Further, cross border flows and
entry of new products have impacted significantly on the domestic banking
sector, forcing banks to adjust their product mix.
43
Biswa Swarup Misra (2003)91 examined whether allocative efficiency
of the Indian banking sector has improved after the introduction of financial
sector reforms in 1990s. Allocative has been studied for 23 state of India. The
findings of the study corroborates that there has been improvement in
allocative efficiency for all states taken together as far as elasticity of total
output to total credit is concerned. At the state level, majority of the state
witnessed an improvement in the overall allocative efficiency in the post
reform period. The improved allocative efficiency is more marked for the
services sector than for industry across the states.
D Narayana (2003)92 made a modest attempt to examine the issue of
low credit-deposit ratio in Kerala. It viewed that the reason for the low CDR
is owing to the lack of credit deployment in industry, trade and finance. The
facts of the case don’t seem to suggest a negative attitude of banks.
Kamesan V (2003)93 was of the view that Indian banking system has
progressed in every aspect from being a financial intermediary to the vehicle
of economic growth.
Muniappan G. P (2003)94 focused on two areas. Firstly, challenges
faced by the bank management and secondly, management of challenges by
the banks. Every aspect of the functioning of the banking industry, be it
profitability, NPA management, customer service, risk management or HRD
has to undergo the process of transformation to align with the international
44
best practices. He concluded that the future of Indian banking system needs a
long term strategy which would broadly cover areas like structural aspects,
business strategies, prudential control systems, integration of markets
technology issues, credit delivery mechanism and information sharing.
T. K Devarajan (2004)95 made a study to evaluate the impact of service
area approach of banking sector on rural development. The results of the
study shows there is a negative trend in the banking sector with regard to the
fulfillment of the credit needs of the weaker sections of the society. It also
revealed that the scant flow of finance to the primary and productive sector
would be adversely affect the overall development of the Kerala.
Christian Rolend (2004)96 focuses on the changing intensity of three
policies that are commonly associated with the financial repression, namely
interest rate control, statutory pre-emptions and directed credit as well as the
effect of these policies had. The main findings are that the degree of financial
repression has steadily increased between 1960 and 1980 and then declined.
Since the reforms started in 1991, the level of financial repression steadily
declined.
Abhijit V Banerjee, Shawn Cole and Esther Duflo (2004)97
investigated the quality of intermediation in banks. It also analyzed in deep
the lending process used by the nationalized bank, in an attempt to understand
45
under lending. The study revealed that the Indian banking sector has
historically suffered from high intermediation cost.
Niti Bhasin (2004)98 made a detailed evaluation on the change in
pattern of world finance, banks and economic development, need for banking
sector reforms, post-reforms scenario and current issues in Indian banking and
viewed that banking sector reforms in India are grounded in the belief that
competitive efficiency in the real sectors of the economy will not realize its
full potential unless the banking sector was reformed as well.
Charan Singh (2004)99 conducted a study on the various financial
sector reforms implemented in our country and evaluated its impact on the
state of Indian economy and viewed that the multi-sector reforms undertaken
in India, though slow phased initially but synchronized, have begun to yield
results.
Venugopal D (2004)100 viewed that as domestic and international
competition hots up banks may have to shift their focus to ‘cost’, which will
be determined by revenue minus profit. Cost control in total with efficient use
of resources and increase in productivity will determine the winners and
laggards.
Bandyopadhyar (2004)101 analyzed mergers in the banking industry
and concluded that even if there are synergies in technology, geographical
46
presence and profile of asset and birth of mega banks through mergers may
not be great use unless the mind set of public sector banks changes.
Chatterjee. S (2004)102 stressed on the retail banking and studied the
reasons behind the euphemism regarding the retail focus of Indian banks and
found that competition is fierce, particularly from banks like HDFC and ICICI
in business of home, car and consumer loan. He found that Indian banks has
shown little or no interest in innovative tailor made products.
Y.V. Reddy (2005)103 evaluated the banking sector reforms in a
detailed manner including all the aspects of reformation. He suggested that we
in India have initiated supervisory capacity building measures to identify the
gaps and to assess as well as quantify the extent of additional capital which
may be required to be maintained by such banks. The magnitude of this task,
which is scheduled to be completed by 2006 appears daunting since we have
as many as 90 scheduled commercial banks in India.
Manoj. P. K (2005)104 examined the financial system in Kerala, its
peculiar features and its evolution in to present state, especially in the context
of financial reforms and also the scope of the financial system in view of the
latest developments in Kerala economy.
Monika Aggarwal and Rishi Raj Sharma (2005)105 analyzed the present
picture of the Indian banking system by comparing PUSBs, PRSBs and FSBs
and attempted to establish the relationship between various performance
47
indicators such as total employees, total business and return on investments of
commercial banks. This study revealed that the growth rate of various
indicators of public sector banks, PRSBs and FSBs was better in the pre-
liberalization period as compared to the post-liberalization period.
Usha Arora and Richa Varma (2007)106 conducted a study on the
operational and productivity efficiency of public sector banks in India. It
revealed that after liberalization, the performance of public sector banks has
improved a lot and they have become more innovative and have a largest
market share in today’s competitive era.
48
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