The overall capital position of commercial banks has witnessed a marked improvement during the reform period (Table 2). Illustratively, as at end-March 2005, 86 out of the 88 commercial banks operating in India maintained CRAR at or above 9 per cent. The corresponding figure for 1995-96 was 54 out of 92 banks.
They also include the undesirable pro-cyclical effects of prudential rules, of accounting rules, of credit rating agencies, and of compensation systems that put undue emphasis on short-term earnings.