India’s banking sector has gone through a paradigm shift in the last few years. The ever-changing and evolving banking industry has played an essential role in the growth and development of the Indian economy. The changes and the shifts in this industry are asset quality, technology, and regulations.
From physical banking services, including customer walk-ins and face-to-face interactions, to digital anchors (including new age contactless technologies), the Indian banking sector has seen a lot.The Indian banking system has commercial banks consisting of public, scheduled, non-scheduled, regional, private, rural, and cooperative banks.
There are 27 public sector banks, 49 foreign banks, 21 private sector banks, 56 regional rural banks, 1526 urban cooperative banks, and 94,384 rural cooperative banks with cooperative credit institutions. The Banking Companies Act of 1949 defines the entire banking system in India.
To make our readers well-informed about the changes taking place in the banking sector, we are here with a clearer picture of how the Indian banking sector has evolved over the last few years.
The Changing Scenario
According to the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and well regulated. Moreover, the Indian banks have also survived the global recession. Further, the digital revolution has played a crucial role in building and shaping India’s banking sector. It has helped to promise unparalleled customer experiences and ensure extraordinary gains in productivity.
The digital payment systems in India have also evolved with Immediate Payment Service (IMPS), which helps in faster payment methods. Especially if we study the post-demonetization period, the finance industry has witnessed a significant shift towards digitization, and now the stakeholders are fully equipped in using the technology diligently. The undergoing changes are leading to the revolution of this industry in the last few years and have been witnessing determined growth and an array of benefits.
With every phase, the Indian banking sector has adapted and diversified itself to make its customer’s financial needs easier and smoother to grow the global financial economy.
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The Driving Economy
Over the years, banks in India have transformed the financial landscape and growth. The Indian banking system keeps the country’s economy afloat in the present scenarios. The Demonetization of the currency notes in 2016 is one of the prime examples. The existing currency notes were wiped out overnight, throwing the entire nation into chaos. The banks helped the economy regain and recover from the shock by allowing people across the nation to exchange invalid banknotes.
With India’s continuously evolving banking industry, the ability to provide robust support to the nation’s financial development also increases.
The Recent Development – Financial Inclusion
Financial Inclusion is the availability and equality of opportunities for accessing financial services like banking. It is the primary key to driving any country’s economic growth and development.
In pursuance of the RBI, the Indian Government is actively trying to propagate financial inclusions through various schemes. These government-run schemes are formed to enhance the outreach of financial services in India. Some of the schemes include –
- Pradhan Mantri Jan Dhan Yojana (PMJDY)
- Atal Pension Yojana (APY)
- Pradhan Mantri Vaya Vandana Yojana (PMVVY)
- Stand Up India Scheme
- Pradhan Mantri Mudra Yojana (PMMY)
- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- Sukanya Samriddhi Yojana
- Jeevan Suraksha Bandhan Yojana
The Emergence in the Use of Technology Based Services
Technological advancement is another important element leveraging the enhancement and productivity in the Indian Banking Sector. In 2002, Core Banking Solutions (CBS) was adopted for incorporating sophisticated technological solutions. It was an important step taken for the technological advancement of the Indian banking sector.
This solution has contributed to the bank-to-client interactions and has also helped calculate penalties, interests, maturity, etc. After 2011, technological integration has raised the customer experience with the digital age. Here are a few current digitally-enabled and government-approved banking platforms, such as –
- Unified Payment Interface (UPI)
- National Unified USSD Platform
- Bharat Interface For Money (BHIM)
- Aadhar Enabled Payment System
The Merging of the Banks
One other change in the banking sector in India is its structural change. The Indian Government is more focused on reducing the number of publicly owned banks by announcing mega-mergers. Thus, the number of public sector banks has been reduced from 27 to 12. We are here mentioning a list of public sector bank mergers until April 2020 –
- In April 2019, Vijaya Bank and Dena bank merged with Bank of Baroda.
- The 6 SBI associates and Bhartiya Mahila Bank merged with the State Bank of India.
- From April 1st 2020, the United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank. (It made them the second largest public sector bank in India)
- With effect from April 1st 2020, the Syndicate Bank got together with the Canara Bank.
- Allahabad Bank merged with the Indian Bank on April 1st, 2020.
- With effect from April 1st 2020, Andhra Bank and Corporation Bank of India merged with the Union Bank of India.
Technology has not only been the only transforming factor in the Indian banking sector. It has also changed the customers’ perception and has worked on their better experience in this industry. The entire Indian banking system is undergoing rapid growth and transformation with emerging digital technologies.
There are also many scopes for more digitization and improvement to gain the overall profitability and efficiency in the services in this sector. The pace at which the entire industry is changing with the technological advancements is making it possible, which was not feasible to achieve in the earlier times.