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Evaluate various banking reforms introduced in India in recent times. Suggest measures that will ensure long-term viability of the banking sector.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. Evaluate various banking reforms introduced in India in recent times. Suggest measures that will ensure long-term viability of the banking sector. (250 words)

Difficulty level: Easy

Reference: Insights on IndiaInsights on India

Why the question:

The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2023 Secure timetable.

Key Demand of the question:

To write about various banking reforms, its successes and limitations and further reforms that are needed for long term viability of baking sector.

Directive word: 

Evaluate – When you are asked to evaluate, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidence.  You must appraise the worth of the statement in question. There is scope for forming an opinion here.

Structure of the answer:

Introduction: 

Begin by giving context.

Body:

First, write about the recent reforms in the banking sector – mergers of banks, the Insolvency and Bankruptcy Code, recapitalization of banks, digital payments, the Jan Dhan Yojana, and the licensing of small finance banks.

Next, write about the successes and shortcomings of the above.

Next, suggest reforms that must be taken in order to overcome the above mentioned limitations  – strengthening governance, addressing asset quality issues, ensuring adequate capital levels, investing in technology upgrades, promoting credit growth, and ensuring a robust regulatory framework.

Conclusion:

Conclude with a way forward.