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Budget 2019: These are key financial sector reforms govt must bring about

11-Jun-2019Charan Singh

Union Budget 2019 India: In an emerging country like India, banks play an important role in financing industry unlike the developed markets where stock markets play a more significant role.

In an emerging country like India, banks play an important role in financing industry unlike the developed markets where stock markets play a more significant role. In the journey of economic development of India, sources of funds for businesses have transited from money lenders and family to that of banks and financial institutions. In December 2017, assets of financial sector accounted for 136 percent of GDP, and bank assets were 60 percent of GDP, according to the IMF. This transition is mainly because of nationalization and consequent government ownership of banks in 1955, 1969 and 1980.

In recent years, public sector banks (PSBs), accounting for nearly 70 percent of total banking activities have been under stress because of rising non-performing assets (NPAs). The Government has been bailing out and recapitalizing PSBs regularly, and trying to strengthen their operations and governance.

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