Impact of International Meltdown on Indian Banking Sector

Abstract

Risk taking is the mark of the fiscal segment. However, the current trade and industry crisis demanded a different set of fire-fighting expertise. It is this ability- having the insight to look afar the hurricane while being caught in one – that makes the winner of this year. Lack of regulatory policy, by the governing body in foreign banks and their greed of money led to the global meltdown. [1] The problem studied by the researchers is the outcome of financial calamity on the functioning of Indian banks. The main purpose of the research study is to know the strong point of our Banking Industry and to carry out the relative study of these banks in order to comprehend their working and identifying the problem areas.The data regarding the cause and effect of the financial debacle,consisting of subprime loans, deregulation, boom and burst in the foreign market, speculation, high risk mortgage loans and lending and borrowing practices, inaccurate credit ratings, government policies, policies of the central bank, credit default swaps, inflow of funds due to trade deficit, boom and collapse of shadow banking system [2] were collected. As compared with Indian banks, their strengths are, declining NPAs, which have declined sharply from over 15% in 1996-07 to 2. 3% at end of March 2008 and other parameters like profitability, productivity, efficiency, where profitability involves return on assets (ROA), return on equity (ROE)and net interest margin. Based on all the discussed parameters it was studied that how Indian Banks sustained the financial disaster. Paper reveals different statistical information about the strengths of Indian Banking system well as a case study of State Bank of India. To overcome the severe antagonism from private and foreign banks, SBI planned a major organizational restructuring exercise. The key facets involved, redesigning of branches, endowing with alternate channels;focusing on a lean structure and technological up gradation. With McKinsey & Company as consultants business process reengineering (BPR) team was formed in June 2003 whose basic target was to generate an operating architecture, which would tune-up with international standards. The project objectives were "increasing customer satisfaction and convenience, freeing up time for branch manager and branch staff to focus on sales and marketing,simplifying process for employees, enhancing SBI's competitiveness in the market, increasing the profitability through higher market share and enhanced competence.