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How Well Have Public Sector Banks Done?

The efficiency of the public sector banks has declined during the 1990s when measured by the spread/working fund ratio. Though the turnover/employee ratio of the public sector banks improved, the ratio for the private and foreign banks doubled relative to that of the public sector banks. The profitability of the public sector banks did improve relative to the private and foreign banks, but they have lost ground in their ability to attract deposits at favourable interest rates, in their slow technological upgradation, and in their staffing and employment practices, which has implications for their longer-term profitability.

Issues in Asset Liability Management - II

From the angle of pricing assets and liabilities a clear and quantified articulation of a bank's strategic objective is needed and this will need to be an adequate return on investment. This is the second of a series of articles discussing the different issues involved in asset liability management by banks.

Deregulation and Performance of Public Sector Banks

How have India's public sector banks (PSBs) performed in the years since bank deregulation was set in motion in 1992-93? The banking system has not collapsed nor has there been a banking crisis and the efficiency of the system as a whole measured by declining spreads has improved. This paper documents and evaluates the performance of PSBs since deregulation in absolute and relative terms and attempts to understand the factors underlying their improved performance.

Banking Sector Reforms

The traditional face of banking is undergoing change - from one of mere intermediator to that of provider of quick cost effective and efficient services. In most emerging economies the banking sector is having to face difficult challenges. A discussion on these challenges and issues arising as a result of the ongoing financial sector reforms is important. What are the weaknesses in the system and how may it cope with the critical issues which will arise as a result of the reform process?

Determinants of Off-Balance Sheet Activities

The paper seeks to identify the factors influencing off-balance sheet (OBS) activities of public sector banks in India. Using pooled data analysis for the period 1995-96 to 1999-2000, the analysis reveals that (i) size plays an important role in influencing OBS activities, and (ii) higher the levels of capital and liquid assets, lower the incentive of the banks to engage in OBS activities. This is in consonance with hedging theory, which contends that the aversion to risk might be an important determinant for banks not actively engaging in OBS activities.

Leadership in Banking

Public sector banks may have succeeded in shedding the excess flab of their workforce, but the malaise lies deeper in the upper echelons of administration. More often than not, chairmen are ill-equipped to meet radical demands of a techno-rich age, and move jobs too quickly to bring about long-lasting change.

Setting the Stage for Bank Privatisation

Whether the move towards eventual privatisation, including transfer of control to foreign banks, is the right prescription for a banking system that has shown an improving trend in efficiency while remaining stable needs to be vigorously debated.

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