The Indian reforms in the financial sector have been successful because of the political stability and conviction of the financial wizards that worked with zeal and devotion to achieve the target.
This praise for the economic planners of India came from Dr Rakesh Mohan, Deputy Governor of Reserve Bank of India, while delivering a lecture on the "Financial Sector Reforms in India" here at State Bank Of Pakistan building on Thursday.
He began his lecture with an observation that this is his first visit to Pakistan and hoped that both the central banks would learn from each other.
Dr Mohan said that the Indian financial reforms began in 1991 in different sector of the economy including banking and forex markets. This was done by assessment and keeping in view the future agenda. "The care was taken to mitigate risks in the financial system, allocate resources to the real estate sector efficiently, make financial system globally competitive and enable opening of the external sector."
According to the Indian banker, applying prudential measures that included phased implementation of international best practices, advanced reforms in the banking sector and measures to strengthen risk management competition enhancing measures were taken.
Dr Mohan said that the Indian financial sector had improved much since 1996-97 and the growth was phenomenal. The banking sector was given a healthy dose of improvement by adopting the competition enhancing measures. The reforms were interwoven with the regulatory process that helped immensely, he added.
In a detailed lecture Dr Mohan further highlighted the measures that were adopted in the banking sector to make it healthy and productive.
MEASURES ENHANCING ROLE OF MARKET FORCES:
-- Interest rate deregulation
-- Reduced pre-emption
-- Enhanced transparency and disclosure
INSTITUTIONAL AND LEGAL MEASURES:
-- Strengthening of credit information and creditors' rights
-- Measures to improve recovery/restructuring environment
-- Improved framework for payments and settlement
TECHNOLOGY-RELATED MEASURES:
-- dedicated communication backbone for banks
-- Introduction of products through this network
-- Setting up an autonomous body for supervision
-- Restructuring of on-site supervision
-- Introduction of off-site surveillance
-- Recasting norms on external auditors, internal control, corporate governance
-- Monitoring systematically important financial institutions
The Indian central bank official said that banking in India was highly visible as one bank served an average of 16,000 people.
Dr Mohan said that the future of the micro financing was bleak in India as it is a thickly populated country and conditions were different in different states. "It was very difficult to regulate the micro finance business due to the vastness of the country and its huge population."
Replying to a question about the opening of two commercial banks in Pakistan and India, he said that the process was on and hopefully the branches could be opened in near future.
Earlier Dr Tawfiq A Hussain, Acting Governor of the SBP, welcomed Dr Mohan and hoped that sharing the Indian experience could be of help to the banking industry in Pakistan.
SBP Banking Services Corporation Managing Director Liaquat Durrani, Executive Director Farhat Saeed, and Economic Adviser Riaz Riazuddin were also present on the occasion.