In this article, we will further discuss about the ABM Economic reforms in Banking sector for CAIIB Advanced Bank Management 2023.

This article is the continuation of our previous post of ‘Economic Reforms that have transpired in the Indian Banking Sector’. As the paper of Advanced Bank Management of CAIIB 2023 Exams will fall due in the month of June 2023, we keep on coming up with easy-to read & remember notes for the banking candidates. As we previously mentioned that as a banker you must know the kind of reforms the banking sector had gone through & the reasons for why they were required. So, keeping that in mind, we will begin our discussion of the same & then move on to the applicable Certified Associate of the Indian Institute of Bankers Exams ABM Study Material 2023!

CAIIB ABM - Advanced Bank Management Syllabus Priority
Check Here
Bank Financial Management - BFM Syllabus Priority
Check Here
110+ CAIIB Case Study Videos
Check here
ABM BFM Retail Previous Year Questions
Get Tests Here
Full Course Videos in Hindi English
Check Here
ABFM and BRBL Courses now available
Click Here
CAIIB Crash course



Even though 2023 is not here yet but if do not start your preparation for Certified Associate of the Indian Institute of Bankers Exam right now, then soon June 2023 will be here. And you will still be out of practice. This means that you need to be prepared for the ABM paper before the due date of this paper. ABM exam success will highly depend on your understanding of the CAIIB syllabus 2023 and practice of the Mock Tests 2023 as per the revised syllabus & the latest CAIIB exam pattern. During the study process, we will outline for you the steps to follow in order to ensure your success in the 2023 CAIIB Exams.


In the previous post we understood that the Quantity wasn’t much of a concern in the idea of ‘progress in rural banking in India’ in comparison to the quality of rural banking services & the matter related to reforms has been mostly concerned with making it more be suitable for rural areas with tailor-made credit packages and providing the rural people technical guidance and marketing support. 

Then we talked about: 

  • The history of Banking Sector Reforms in India in Pre Independence & Post Independence
  • The Reasons behind the Banking Reforms in India: 
  • Structure of the Indian Banking System
  • Various committees on whose recommendations the reforms took place.
  • First phase of economic reforms: policy framework, institutional framework & financial health

Now, we will talk about:


The second phase of reforms in the banking sector came with the strengthening the very establishment of the banking system. It happened in 3 ways: 

  1. Reformation in the banking industry’s structure, 
  2. up gradation in technology, and 
  3. development of human resource. 

Two types of banking regulations were formed: economic regulations and prudential regulations.


Prudential Regulation 

Before the reforms came into picture, RBI used to regulate the banks by imposing restrictions on interest rates, narrowing down the entry norms & by directing the lending to ensure judicious end use of bank credit. However, such economic regulation on banks affected their productivity & efficiency. Hence, the Reserve Bank of India came up with prudential regulation instead.

There was imposition of minimum limit on the capital level(s) of banks with the objective of maintaining the wealth of banks in particular and so that the reliability of the financial system in general can be ensured. It has allowed much greater scope for the market forces to freely play than what was previously permitted by economic regulations alone. 



Prudential Norms were issued by RBI on the basis of Recommendations of the Committee (the 2nd Narasimhan Committee) on Banking Sector Reforms. The main objective behind the prudential norms was to ensure the financial safety, soundness and solvency of banks. These prudential norms are directed toward ensuring that the banks operate as prudent entities, remain free from undue risk-takings, and do not breach banking regulations in pursuit of their objective of profit.

The main focus of Prudential Reforms was in 3 areas: 

  • NPAs 
  • Capital adequacy 
  • Diversification of operations


Non-Performing Assets (NPAs):

In 1990’s the main problem which PSBs were facing was a high proportion of NPAs (an asset from which income is overdue for > 6 months). 

The 2nd Narasimhan Committee report (1998) stated that other than NPA, there was no other indicator to reflect the quality of assets & their impact on banks’ viability in relation to advances. 

Gross NPAs of Scheduled Commercial Banks (SCBs) increased over the period 31-03-1998 to 31-03-2002 from Rs. 51,815 crores to Rs. 70,924 crores while the Gross NPA of public sector banks (PSBs) was also correspondingly higher. 

However, the share of Public Sector Banks in total NPAs declined from 90% to 82% during the 1998 to 2002. Furthermore, there was also a decrease in the ratio of gross NPAs and net NPAs which are measured as % age of advances as well as assets. These ratios represent the quality of banks assets & are therefore, were taken as measures of reliability of the banking system. Gross and net NPAs of SCBs declined substantially during this period. 

However, the ratio of gross and net NPAs as a proportion of gross advances and of total assets increased significantly for new private sector banks from period between 2001 to 2002 as weak banks were merged with strong banks. These NPAs originate due to increase of bad debt. You would be surprised that there are some banks, whose net NPAs had exceeded their net worth leading to negative net worth. 


Capital Adequacy Ratio:

Capital Adequacy Ratio (CAR) was implemented to initiate banking sector reforms. Reforms of this nature have focused on bringing prudential norms into line with international standards. By tying a bank’s CAR to the riskiness of the loans it makes, the Basel Committee for international banking supervision sought to reduce bank failures worldwide. Commercial banks around the world are required to maintain minimum capital funds for safety reasons because a bank’s capital base plays a significant role in its long-term performance. Furthermore, it gives the power to absorb shocks and, therefore, reduces the risk of bankruptcy in the medium term.


Diversification in Bank Operations:

During the period of economic liberalization, public sector banks have substantially diversified their activities. Their activities have expanded to include mutual funds, merchant banking, venture capital funding, and para-banking activities such as leasing (lease financing), hire-purchase, factoring, forfaiting, etc. Providing a variety of banking services under one umbrella (directly and through subsidiaries) has been the main objective, in order to generate maximum profits. Many banks including the SBI have turned out to be an one-stop financial services centre.

You can check out our other easy notes on the paper of Advanced Bank Management for CAIIB June 2023 exams.



The upcoming CAIIB Exams will be the first exams that will be held as per the new & extended syllabus. This could be your last attempt provided you study aggressively to ensure your success.

Learn Sessions offers online courses for CAIIB & other IIBF exams such as MSME, AML KYC, and Bank Promotion exams (clerical to scale-5). Therefore, you can trust us to help you prepare for all of your Certified Associate of the Indian Institute of Bankers exams.

The Certified Associate of the Indian Institute of Bankers classes can be attended via mobile or laptop through our apps that are available at iOS & Android stores or can be watched on Laptop/PC. The link of apps & website is given below:

The course highlight available for ABM Full Video Course 2023 are:

  • Live Advanced Bank Management lectures + their Recordings
  • Questions Videos as well as Conceptual Videos to choose from
  • Lectures are prepared by the ABM expert faculty
  • 24 by 7 access to the ABM Study materials 2023
  • ABM Mock Tests as per latest Exam pattern. They also include Memory Recalled Questions.
  • Recorded lectures are also downloadable on mobile apps
  • Most reasonable prices with flexible packs
  • ABM Courses are available in English language as well as Hinglish language 
  • Latest & updates Syllabus of CAIIB ABM 2023 


For more details, you are welcome to:


For any query related to Study materials/video classes as well as offers on CAIIB, or other IIBF Certification Exams (IIBF AML KYC, IIBF CCP etc) or Bank Promotion Exams of all the scales on our WhatsApp No.: 8360944207

For daily free bank updates, join us:

We wish you best for your ABM 2023 Exams!

Team: Learning Sessions

Also Like:


Please enter your comment!
Please enter your name here

🤩 🥳 JAIIB NEW BATCH START 🥳 🤩spot_img
🤩 🥳 JAIIB CAIIB CLASSES 🥳 🤩spot_img



Continue to the category


JAIIB FREE NOTES OF PPB 2024 | BANKING OMBUDSMAN SCHEME In this article, we will discuss the Banking Ombudsman Scheme (which falls under the syllabus...


FREE BANK PROMOTION NOTES FOR 2024 | RISK MANAGEMENT So, the next session has already begun & there should not be anything that does not...


FREE RISK MANAGEMENT MOCK TEST 2024 | CAIIB 2024 This post contains IIBF CAIIB’s paper - Risk Management Mock Tests as per the CAIIB Syllabus...

JAIIB Principles and Practices of Banking Study Material Live Class Previous Year Questions Part 12

JAIIB PPB STUDY MATERIAL LIVE CLASS | PREVIOUS YEAR QUESTIONS PART 12   JAIIB exam is one of the premium flagship courses offered by IIBF twice...