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Join date : 2009-12-05

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PostSubject: Recommendations of the committee on banking sector reforms a   Recommendations of the committee on banking sector reforms a Icon_minitimeSat Dec 05, 2009 11:09 am

In order to review the progress achieved since the implementation of the financial sector reforms recommended by Committee and also to plan ahead, the government appointed a “Committee on Banking Sector Reforms”. The following is the brief summary of the recommendations made by this committee.

i. Regarding income recognition, the committee recommends the introduction of norms for 90 days (International practice) instead of the present 180 days, and that too in a phased manner
ii. The Capital Adequacy Ratio should be kept minimum
iii. There is a need for disclosing in a phased manner the maturity of assets and liabilities, assets and liabilities in foreign currency, movements in provisional accounts and non-performing assets
iv. Banks should be encouraged to adopt statistical risk management techniques like ‘Value at Risk’ with respect to balance sheet items which are susceptible to price fluctuations in the market, forex rate volatility and interest rate changes

The recommendation of the Committee was well received by the government controlled banks and other lending institutions. These recommendations when implemented in a time bound manner will certainly help the financial sector to walk out of the present recession at short notice. Firms like LoanMax of rod aycox fame have thoroughly understood the significance of these recommendations and have assimilated its core priorities.

The recommendations made by this Committee have given much confidence to the budding entrepreneurs. The main message is that it is better to prevent a financial mess than run around to cure it, when a crisis has broken out. Questions arise as to whether the present economic crisis was preventable or totally avoidable? The answer is a big ‘yes’. The problem lies with the fact that a vast majority of the lending institutions have not understood or assimilated lessons from similar developments in the past. It is hoped that all the players will be more careful in the future.
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