Indian Banking Scenario

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  • Topic: Bank, Retail banking, Commercial bank
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  • Published : October 27, 2009
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Indian Banking Scenario
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively

Organizational Structure of Banks in India
In India banks are classified in various categories according to differ rent criteria. The following charts indicate the banking structure: Broad Classification of Banks in India
1)The RBI
The RBI is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all scheduled banks and hence is known as the “Reserve Bank”. 2) Public Sector Banks

State Bank of India and its Associates (8)
Nationalized Banks (19)
Regional Rural Banks Sponsored by Public Sector Banks (196)

3) Private Sector Banks
Old Generation Private Banks (22)
Foreign New Generation Private Banks (8)
Banks in India (40)
4)Co-operative Sector Banks
State Co-operative Banks
Central Co-operative Banks
Primary Agricultural Credit Societies
Land Development Banks
State Land Development Banks
5) Development Banks
Development Banks mostly provide long term finance for setting up industries. They also provide short-term finance (for export and import activities) •Industrial Finance Co-operation of India (IFCI)

Industrial Development of India (IDBI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development (NABARD) •Export-Import Bank of India
Future of Indian banking sector

The interplay between policy and regulatory interventions and management strategies will determine the performance of Indian banking over the next few years. Legislative actions will shape the regulatory stance through six key elements: industry structure and sector consolidation; freedom to deploy capital; regulatory coverage; corporate governance; labour reforms and human capital development; and support for creating industry utilities and service bureaus. Management success will be determined on three fronts: fundamentally upgrading organizational capability to stay in tune with the changing market; adopting value-creating M&A as an avenue for growth; and continually innovating to develop new business models to access untapped opportunities. Through these scenarios, one paint a picture of the events and outcomes that will be the consequence of the actions of policy makers and bank managements. These actions will have dramatically different outcomes; the costs of inaction or insufficient action will be high. Specifically, at one extreme, the sector could account for over 7.7 per cent of GDP with over Rs.. 7,500 billion in market cap, while at the other it could account for just 3.3 per cent of GDP with a market cap of Rs. 2,400 billion. Banking sector...
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