Banking sector reforms in India have been unique and able to bring about fundamental changes in the system in a non-disruptive manner, Chairman, Prime Minister’s Economic Advisory Council, C Rangarajan said on Wednesday.

“The financial sector of India, as a whole, exhibits vibrancy and resilience,” he said at a FICCI conference here.

Equally encouraging
Indian banking is on a strong position in terms of capital adequacy, provisioning and profitability, Mr Rangarjan said, while delivering the inaugural address. Capital position of Indian banks has improved considerably over the past decade and since 1995-96, the banking sector, on the whole, has been maintaining capital to risk assets ratio (CRAR) consistently well above the minimum stipulated norm, the EAC chairman observed.

“Overall CRAR for all scheduled commercial banks (SCBs) has increased from 8.7 per cent at end-March 1996 to 12.3 per cent at end-March 2006,” Mr Rangarajan said, adding the reduction in banks’ bad debts “has also been equally encouraging”.  The gross non-performing assets of all scheduled commercial banks declined from 15.7 per cent of gross advances at end-March 1997 to 3.3 per cent at end-March 2006.

The net non-performing assets to net advances ratio also declined from 8.1 per cent to 2.1 per cent during the same period.

Highlighting the improved financial performance of SCBs in recent years, Mr Rangarajan said the operating profit to asset ratio of SCBs, which was 1.69 in 1995-96, touched a peak of 2.66 per cent in 2003-04. In 2005-06, it declined to 2.03 per cent, Mr Rangarajan added.

GDP GROWTH PEGGED AT NINE PER CENT
Mumbai, pti: The country’s GDP growth rate for the year would be about nine per cent, Chairman, Economic Advisory Council to the Prime Minister, C Rangarajan said on Wednesday.

“For the year as a whole, the growth rate would be maintained .There could be some special features... I have not yet analysed it. But overall the growth rate of the economy during the year will be about nine per cent,” the Economy Advisory Council Chairman  said here.

Interest rates
On interest rate cut by the Reserve Bank of India (RBI) in the light of softening inflation, Mr Rangarajan said that the monetary policy had played a role in keeping price level well anchored but price trends have to be well established before reducing interest rates.

“It is good that the year-on-year inflation is below four per cent, Mr Rangarajan said.

 “But we also need to watch how the prices behave during the year and therefore monetary policy changes have to come after a clear trend has been well established,” Mr Rangarajan pointed out.