Future reforms in the banking sector in India

India has performed well in recession period the late 2000s, mainly thanks to the strong regulation structure and transparency of the private sector Indian banks. But a strong potential is still there to perform better. Here is some food for thought of the changes that the banks in general can do to gather some momentum:
  1. Uniform individual and company credit rating agency – Although more than half of the country feel that there is no need of such agencies, I strongly suggest a need of a uniform, structured, and regulated body for rating individuals and as well as corporate identities.
  2. No transaction fee for inter bank transaction at ATM machines  – This might seem a distant dream when any individual drawing money from a different bank is levied no charges. But there will be a time when this practice will allow a greater money flow to ensure a rotation of cash.
  3. No Cap for a day transaction amount – No upper limit for a day transaction should be kept. For many banks it is currently 15 K INR or 20 K INR. Instead the division must be made into three sectors for the same account – current, savings, and fixed under three different interest schemes for each of them.
  4. Gold, Ruby, Diamond, Platinum Class with different schemes – For people having higher amount of savings let this be a bifurcation for a different interest of return, as well as benefits like holiday package and free airlines tickets. The bifurcations are 1 crore INR to 2 crore INR (Gold), 2 to 5 crore INR ( Ruby ), 5 to 10 Crore INR ( Diamond ), above 10 Crore as Platinum Level.
  5. Adorn the Best Practices of the FMCG companies – Start like in a bank by selling new customer just like HLL does to a new employee. Find out the difficulties in the roots. Target rural areas mostly.  Definitely for private banks the market of rural area has a huge market. Bundle products like insurance in life and health if necessary.
  6. An efficient method of nationalizing banks all over the country – Most of the people believe in government controlled banks. Almost over 70% of the deposits in India are in Government run banks. This makes it necessary to nationalize these banks.
  7. Credit Limit pushed in Agriculture and small scale industries mandatory by law after a certain CRR and volume is received– After a certain cash reserve ratio is made, and a certain cash reserve is achieved, the government must push the private sector banks to invest in the rural areas, and not just work for profitability.
  8. For the government, control the new law of opening banks in the rural areas in a ratio maintained by the government like for each 7 openings in the urban sector, 2 should be opened in the semi-urban and 1 in the rural sector – This is to ensure that the private sector banks do not work for profitability alone, but try to make a value system, rather create it.
  9. Better regulation in detecting NPAs and for banks writing off its assets.– This is to ensure that the risks are absorbed externally as well as internally.
  10. Segregation in profit-making, marginal and loss making banks which are under the government – This is to ensure that the loss making units are not underperforming.
The main question is that how to deal with the chit funds where most of the gullible people invest and make a loss? Also how to route the black money from the Swiss Accounts to the country? Or even lure NRI investors to put the money in Indian banks for use? Any idea?

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