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Studies have revealed the factors responsible for the problems in the banking industry. The saying goes that the ‘strength of the chain is in the weakest link’. Measures to control or strengthen the weak links have resulted in major developments. So, to rein in the weak areas in the banking sector and also to assimilate the global changes in the financial environment, the national government appointed a high level “Committee on the financial System”.

The government took broad steps for making significant improvements in the banking sector using the concept of deregulation and also by creating a competitive environment for the banking sector in the country. The “Committee on Financial System” examined all aspects relating to the following aspects of the financial system like,
• Structure
• Organization
• Functions and
• Procedures

The recommendations made by the committee regarding the developments in the financial system have given newer insights into the market developments. The following major steps have been taken by government for implementing the banking sector reforms. They are

i. Increasing the profitability of the banks
ii. Uniform accounting policies, particularly, those related to income recognition
iii. Making provisions for loan losses
iv. Speedy recovery of loans
v. Restructuring of the banking system

All these aspects when implemented in a time bound manner have resulted in major changes in the financial economy. Firms like LoanMax of rod aycox fame have greatly benefited from the financial package instituted by the government.