According to CII, despite the impressive gains over the past eight years, India has basically remained at the first phase of (macro-economic) reforms.

The second phase -- micro-economic, sectoral and structural reforms have still remained as part of the unfinished agenda and is critical to give greater play to macro-economic reforms.

As a part of the financial sector reforms, CII has stressed on the need for reforms in the banking sector and has pointed out that the sector bears the burden of priority sector lending which was estimated at an alarming 40 per cent of out-standing bet bank credit in 1997-98. Such credit, CII said fetch lower interest income, carry significantly higher unit administrative costs and have a proportionately higher share of non-performingloan assets (NPAs).

The public sector banks continue to carry very high NPAs and in 1997-98, the ratio of gross NPAs to total advances was 16 per cent, thereby resulting in dead-weight loss preventing a downward move in lending rate, said CII.

Even though acknowledging that reforms in the banking sector were not easy, CII emphasised that they were vital for the competitive growth for real sectors of the economy. CII has emphasised on five elements of banking reforms: capital adequacy, income regulation, NPAs and prudential norms; privatisation; weak banks; attachment and foreclosure procedures against systematic defaulters and greater flexibility for the all India development financial institutions (DFIs).

As far as the capital adequacy ratio is concerned, CII has stated that it should be possible to raise the ratio from eight to 12 per cent in four years.