REVIEW OF MOTIVATION REQUIRED IN BANKING, INSURANCE AND FINANCE SECTOR IN INDIA

Dr.A.Narasima Venkatesh

Professor and Head of The Department, Human Resource Management and General Management, ISBR Business School, Bangalore, Karnataka

Nirav R Goda

Asst Professor Dept of Banking & Insurance, Thakur College of Science & Commerce ( Autonomous ), Mumbai, Maharashtra

Dr. Jyoti Khare

Associate Professor, Govt. PG College, Dehradun, Uttarakhand

Dr.  Jai Jayant

Assistant Professor, Department of Management, Himgiri Zee University, Dehradun,  Uttarakhand

Mr. Chandra Dev Bhatt

Assistant Professor, Department of Management, Himgiri Zee University, Dehradun, Uttarakhand

Dr. V. Dheena Dhayalan

Associate Professor, PG Department of Commerce, (on deputation from Annamalai, University)

Sri Subraminyaswamy Government Arts College, Tiruttani, Tiruvallur, Tamilnadu

Abstract

The Indian financial system of the pre-reform period essentially catered to the needs of planned development in a mixed-economy framework where the Government sector had a predominant role in economic activity. As part of planned development, the macroeconomic policy in India moved from fiscal neutrality to fiscal activism (Reddy 2000). Such activism meant large developmental expenditures, much of it to finance long-gestation projects requiring long-term finance. The sovereign was also expected to raise funds at fine rates, and understandably at below the market rates for private sector. In order to facilitate the large borrowing requirements of the Government, interest rates on government securities were artificially pegged at low levels, which were unrelated to market conditions. The government securities market, as a result, lost its depth as the concessional rates of interest and maturity period of securities essentially reflected the needs of the issuer (Government) rather than the perception of the market. The provision of fiscal accommodation through ad hoc treasury bills (issued on tap at 4.6 per cent) led to high levels of monetization of fiscal deficit during the major part of the eighties. In order to check the monetary effects of such large-scale monetization, the cash reserve ratio (CRR) was increased frequently to control liquidity.

Keywords: credit, liquidity, monetary, large-scale, cash