IBPS English Comprehension Test 6
Read the following passage carefully and answer the questions given below it.
Banking sector reforms in India were introduced in order to improve efficiency in the process of financial intermediation. It was expected that banks would take advantage of the changing operational environment and improve their
performance. Towards this end, the Reserve Bank of India initiated a host of measures for the creation of a competitive environment. Deregulation of interest rates on both deposit and lending sides imparted freedom to banks to appropriate price their products and services. To compete effectively with non-banking entities, banks were permitted to undertake newer activities like investment banking,
securities trading and insurance business. This was facilitated through amendments in the relevant acts which permitted PSBs to raise equity from the market up to threshold limit and also enabling the entry of new private and foreign banks.
This changing face of banking led to an erosion of margins on traditional banking business, promoting banks to search for newer activities to augment their free
incomes. At the same time, banks also needed to devote focused attention to
operational efficiency in order to contain their transaction costs. Simultaneously with the deregulation measures prudential norms were instituted to strengthen the safety and soundness of the banking system. Recent internal empirical research
found that over the period 1992-2003, there has been a discernible improvement in the efficiency of Indian banks. The increasing trend in efficiency has been fairly uniform, irrespective of the ownership pattern. The rate of such improvement has, however, not been sufficiently high. The analysis also reveals that PSBs and private sector banks in India did not differ significantly in terms of their efficiency measures. Foreign banks, on the other hand, recorded higher efficiency as compared with their Indian counterparts.