India’s banking sector is
sufficiently capitalised and well-regulated as the financial conditions and the
economy in the present moment is compatible with any country in the world.
Indian banks evidently withstood the global downturn efficiently and have the
capability to recover quickly from difficult conditions. India is known to be
one of the fastest growing economies in the world and still the poor status of
the banking sector is witnessed. The Banking Regulation Act was introduced to
strengthen the root level of the banking structure within India with the
primary objective to free the banking system from its lacunas and promote its
growth and development, however, the ground reality is different. If the Act is
not equipped well, it won’t serve its objectives. The pertinent concern is the
blend that the financial system in India including banking, insurance, capital,
taxation, etc. each has many regulators and separate mandate. The financial
system and banking particularly is still characterised by considerable
fragmentation of legislation, regulation and enforcement. The policy related
frictions might arise from the diversity of different legislations and the
overlapping of the regulatory jurisdictions. Among financial jurisdictions
there might be a possibility of risk of legal arbitrage. These circumstances
call for the need to rewrite and streamline the financial sector laws, rules
and regulations and to bring them in harmony with the requirements of India’s
fast growing financial sector. The current legislations were drafted in the
contemporaneous setting and should be amended from time to time to incorporate
changes in the milieu. Amending old provision or enacting new law is a
continuous process to remain aligned to changing circumstances. In the emerging
scenario and amid global economic worries, the task of preventing financial
risks has become more important and challenging which, on completion, would
immensely benefit the financial sector in India and economy at large.