Banking sector

Banking Industry in India
Abhishek Mundra
abhishekmundra05@gmail.com
Saksham Jain
cedaus97@gmail.com

BFSI Services - Banking, Financial services and Insurance (BFSI) is an industry term for companies that provide a
range of such financial products/services such as universal banks.
Financial services the economic services provided by the finance industry, which encompasses a broad range of
businesses that manage money, including credit unions, banks, credit card companies, insurance companies,
accountancy companies, consumer finance companies, stock brokerages, investment funds, real estate funds
and some government sponsored enterprises.
Banking services is a part of Financial Services that accept deposits from customers and then use that money to
make loans. But these days banks also raise capital from investors or lenders, and then use that money to
invest, buy securities and provide other financial services to customers and their businesses.
BFSI Services
2

Before the establishment of banks, the financial activities were handled by money lenders and individuals. At that
time the interest rates were very high and there were no security of public savings and no uniformity regarding
loans. So as to overcome such problems the organized banking sector was established, which was fully
regulated by the government.
The following functions of the bank explain the need of the bank and its importance:
• To provide the security to the savings of customers.
• To control the supply of money and credit
• Encourage public confidence in the working of the financial system, increase savings speedily and efficiently.
• To avoid focus of financial powers in the hands of a few individuals and institutions.
• To set equal norms and conditions (i.e. rate of interest, period of lending etc) to all types of customers
Need of a Bank
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The Banks are the main participants of the financial system in India.
For the past three decades, India’s banking system has several outstanding achievements to its credit.
All the bank's safeguards the money and valuables and provide loans, credit, and payment services, such as
checking accounts, money orders, and cashier’s cheques
Indian Banking Sector at a Glance
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1786 - The first bank in India, The General Bank of India was established.
The East India Company established Presidency Banks - The Bank of Bengal/Calcutta (1809), Bank of Bombay (1840), Bank
of Madras (1843).
1921 - All presidency banks were amalgamated to 22 form the Imperial Bank of India run by European Shareholders.
1935 - The Reserve Bank of India was established.
1949- To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking
Companies Act.
1955 - the Imperial Bank of India was nationalized and was given the name "State Bank of India", to act as the principal agent
of RBI and to handle banking transactions all over the country.
Till the year 1980 approximately 80% of the banking segment in India was under government’s ownership. On the suggestions
of Narsimhan Committee, the Banking Regulation Act was amended in 1993 and thus the gates for the new private sector
banks were opened.
Indian Banking Sector - History
5

Banking Structure of India
India’s banking industry is classified into scheduled commercial banks and scheduled co-operative banks with the
Reserve Bank of India as the central bank.
7

Role of RBI in Indian Economy
In every country there is one organization which works as the central bank. The function of the central bank of a
country is to control and monitor the banking and financial system of the country.
RBI as the Regulator of Financial System:
Controlling money supply in the system,
Monitoring different key indicators like GDP and inflation,
Maintaining people’s confidence in the banking and financial system, and
Providing different tools for customers’ help, such as acting as the “Banking Ombudsman.
RBI as the Issuer of Monetary Policy:
Inflation control
Control on bank credit
Interest rate control
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Role of RBI in Indian Economy (ctd.)
RBI as the Controller and Supervisor of Banking Systems:
Issue Of Licence: Under the Banking Regulation Act 1949, the RBI has been given powers to grant licenses to commence new
banking operations, open new branches for existing banks.
Foreign Exchange Control: The RBI plays a crucial role in foreign exchange transactions. It does due diligence on every
foreign transaction, including the inflow and outflow of foreign exchange. It takes steps to stop the fall in value of the Indian
Rupee. The RBI also takes necessary steps to control the
KYC Norms: To curb money laundering and prevent the use of the banking system for financial crimes, The RBI has Know
Your Customer guidelines. Every bank has to ensure KYC norms are applied before allowing someone to open an
account.
Audit and Inspection: The procedure of audit and inspection is controlled by the RBI through off-site and on-site monitoring
system. On-site inspection is done by the RBI on the basis of “CAMELS”. Capital adequacy; Asset quality; Management;
Earning; Liquidity; System and control.
RBI as the Issuer of Currency:
Section 22 of the RBI Act gives authority to the RBI to issue currency notes.
The RBI also takes action to control circulation of fake currency.
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Banking Sector Contribution to Employment in INDIA
The Banking sector in India has always been one of the most preferred avenues of employment.
Today, banks have diversified their activities and are getting into new products and services that include
opportunities in credit cards, consumer finance, wealth management, life and general insurance, investment
banking, mutual funds, pension fund regulation, stock broking services, custodian services, private equity, etc.
that provide lot of job opportunities for people.
Analysis:
By 2013 the Indian Banking Industry employed 1,175,149 employees
Overall employment levels in the Indian banking system increased at a CAGR of 3.5% during the FY09-FY13
period. The main drivers of these employment trends have been the private sector banks which witnessed a
growth of 8.7% CAGR in their number of employees during the same period.
Today one in every four bank employees works with a private bank today.
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●As a result of the hirings, the share of Indian private bank employees in the industry has gone up from 10.76 per cent in
March 2005 to 25.7 per cent at the end of March 2014, with the addition of 203,696 employees during this period.
●On the other hand, public sector banks (PSBs) grew at a CAGR of 2.3% while the foreign banks saw a decline of -3.8%
in the employment levels
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Segmentation and Offering
Banks offer a wide range of products across retail, wholesale and treasury segments.
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Performance of The Indian Banking System
Number of Banks, Branches and ATMs
As of 2013 Total number of commercial banks in India are 157
The given data shows the growing number of Branches and ATMs and their Regional Distribution
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Performance of The Indian Banking System (ctd.)
Market Share
● According to KPMG-CII report, India’s banking and financial sector is expanding rapidly and has the potential to become the
fifth largest banking industry in the world by 2020 and third largest by 2025.
● About 59% population of the country is banked.
● PSBs dominated the banking system with a market share of 72.1% (which declined from 78.2% in FY05) as at end March
2014 distantly followed by NPBs (15.9%), FBs (7.2%) and OPBs (4.9%).
Distribution on Different Sectors
● PSBs Share by 2014 in advances to agriculture, industries, services, retail and other services account for 13.90%, 46.32%,
20.93%, 15.74% and 3.11% respectively.
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Robust asset growth
● Total Indian banking sector assets has reached USD 1.5 Tn in FY12, with 73 per cent of it being accounted by the public
sector and by FY25 it is estimated to be USD 28.5 Tn
Growing lending and deposit
● Aggregate deposit increased from USD 270 Bn in 2005 to USD
1.1 Tn in 2013 and credit increased from USD 170 Bn to
USD 840 Bn in same period.
● Total banking sector credit is expected to increase at a CAGR*
of 18.1 per cent to USD 2.4 Tn by 2017
● Total lending and deposits have increased at CAGR of 22.8
per cent and 21.2 per cent, respectively, during FY06-13 and
are further poised for growth, backed by demand for housing
and personal finance
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Non Performing Assets
● NPA is a classification used by financial institutions that refer to loans that are in jeopardy of default. Once the
borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-
performing asset.
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Performance of Various Indian Banks
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Analysing Conditions - SWOT
A SWOT analysis of a bank formally evaluates the financial institution’s strengths, weaknesses, opportunities and
threats This analysis identifies these four main elements to help upper management better leverage its strengths to
take advantage of future business opportunities while better understanding its operation weaknesses to combat threats
to potential growth.
Strength
The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial
sector regulatory entities, have made several notable efforts to improve regulation in the sector and strengthen it.
These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between
commercial and cooperative banks; deregulation of saving rates
Bank lending has been a significant driver of GDP growth and employment( domestic credit :77.7%GDP 2013)
Extensive reach: the vast networking & growing number of branches & ATMs. Indian banking system has reached even to the
remote corners of the country
Diversification in their operations Banks offer an entire gamut of services including insurance, investment banking, asset
management, private equity foreign exchange, payment of utility bills to customers, mobile and internet banking
Technological upgradation : through the introduction of IT related products in internet banking, electronic payments, security
investments, information exchanges; diverse services with less manpower.
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Analysing Conditions - SWOT (ctd.)
In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance
sheets relative to other banks in comparable economies in its region.
Basel 3 Accord :improve the banking sector's ability to absorb shocks arising from financial and economic stress that improve
risk management & governance and strengthen banks' transparency and disclosures. Hence Banks have gained financial
strengths in terms of Productivity and Profitability.
Weakness
PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk
management and the overall organisational performance ethic & strengthen human capital
Poor customer service , low operating size , High level of nonperforming assets, Inadequate access to global financial system ,
Underutilized capacity particularly in rural areas
Refusal to dilute stake in PSU banks
The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks
for raising equity capital
NPA major weakness public and private sector banks.may touch 6.5% in june 2015.
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Opportunities
Untapped rural market : .About 80% of the rural households in India have no access to formal lending.
About 46% of these used informal lending channels, 24% of which resorted to unregulated money lenders
These unregulated money lenders charge astronomical interest rates on their loans which reflect that there is scope for
cheaper and more formal lending in the rural credit market. The rural economy accounts for more than two-thirds of India's
population and has great untapped potential.
Increase the profitability by accessing international financial market for procuring funds cheaply and deploy funds prudently.
The emerging economies banking sectors are expected to outgrow those in the developed economies.
India has particularly strong long-term growth potential it could become the third largest domestic banking sector by 2050
after China and the US, but ahead of Japan, the UK and Germany.
Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly
demand enhanced institutional capabilities and service levels from banks
New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and
develop differentiated business models Attracting, developing and retaining more leadership capacity.
Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit
banks to trade in commodities and commodity derivatives the Act gives the Reserve Bank of India (RBI) to power to license
banks, have regulation over shareholding and voting rights of shareholders
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Threats
Competition from new players. Increase in the number of foreign players would pose a threat to the PSB as well as the private
players
Competition at global level in terms of product innovation and product mix.
Keep pace with the fast growing technology.
Rise in inflation figures which would lead to increase in interest rates.
The biggest challenge is the re-structuring of the assets of some of the banks as it would be a tedious process, since most of
the banks have poor asset quality
Demanding customers are ready to jump from one bank to another when they are not satisfied with the service provided. This
causes major threat particularly to PSUs.
Threat of stability of the system: failure of some weak banks has often threatened the stability of the system
Cyber Threats
Banks need to start proactively educating their employees and customers to prevent cyber threats from persisting.
Banks should work on improving of awareness of the different threats that currently exist, including e-mail fraud , phishing and
malware . A notification was sent out by the Reserve Bank of India stating that every bank needs a mandatory CISO
position to be accountable for the risks. Other standards, such as one-time passwords, have helped to protect Indian banks
and their customers
26

Analysing Conditions - Economic
Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented
which has an Impact on banking sector.
Banking sector is directly related to the growth of the Economy. GDP
To curb the inflation and slowdown of economy RBI takes various steps like lowering interest rates to increase the
demand in banking sector.
Fiscal Policies
financial inclusion plan
The financial inclusion plan, announced by Prime Minister Narendra Modi is likely to be launched in two phases.
The first phase would comprise universal access to banking facilities. Under this, basic bank accounts with zero
balance,RuPay debit card and financial literacy, will have to be completed in the next one year.
In the second phase (August 2015-2018), micro insurance and unorganised sector pension schemes like
Swavlamban would come along with the banking account. Officials said the inbuilt accident insurance cover of
Rs 1 lakh, death insurance schemes would act as incentives for households to open a bank account.
For 2015-16, Jaitley has aimed to contain the fiscal deficit at 3.9 per cent of the GDP and the revenue deficit at 2.8 per
cent of the GDP in the current fiscal.
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Analysing Conditions - Economic (ctd.)
Cash Reserve Ratio
It is a certain percentage of bank deposits which banks are required to keep with RBI in the form of reserves
The money supply in the economy is influenced by CRR.
Higher the CRR with the RBI lower will be the liquidity in the system.
The RBI is authorized to vary the CRR between 3% and 15%.
Currently it is 4%.
Liquidity Adjustment Facility (LAF):● Repo Rate(7.25): Repo rate is the rate at which the RBI lends short-
term money to the banks against securities. When the repo rate
increases borrowing from RBI becomes more expensive.
● Reverse Repo Rate(6.25): The rate at which RBI borrows from
commercial banks
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Investment Policies
Bank may invest its surplus funds in any commercial, private & cooperative Banks.
Mandatory Investment:In terms of mandatory requirement of Banking Regulation Act, it is compulsory to invest
minimum 3% as Cash Reserve Fund (CRR) & 25% as Statutory Liquid Reserve.
Principles of Tax-Exemption of Investments: Finally, the investment policy of a bank should be based on the
principle of tax exemption of investments. The bank should invest in those government securities which are
exempted from income and other taxes. This will help the bank to increase its profits.
Govt. has provided some securities which are exempted from tax. The bank should invest in those securities which
are exempted from income and other taxes. This will help the bank to increase its profits.
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Investment Policies: FDI
A foreign bank or its wholly owned subsidiary regulated by a financial sector regulator in the host country can now
invest up to 100% in an Indian private sector bank.
Other foreign investors can invest up to 74% in an Indian private sector bank, through direct or portfolio investment.
The new FDI norms will not apply to PSU banks, where the FDI ceiling is still capped at 20%.
ICICI not Indian Owned
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-
owned subsidiary.
ICICI's shareholding in ICICI Bank was further reduced to 46% through a public offering of shares in India in fiscal
1998.
As the direct and indirect foreign holdings in ICICI Bank and HDFC are around 67% and 73% respectively, they will
be not be treated as Indian institutions.
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Monetary Policies
Statutory liquidity ratio (SLR):
Every financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total
time and demand liabilities. These assets have to be kept in non cash form such as G-secs precious metals, approved
securities like bonds etc. The ratio of the liquid assets to time and demand liabilities is termed as the Statutory liquidity
ratio.
● The reduction in SLR enhances the liquidity of commercial banks.
● The maximum limit of SLR is 40% and minimum limit of SLR is 0 In
India, Reserve Bank of India always determines the percentage of SLR.
● There was a reduction of SLR from 38.5% to 25% because of the
suggestion by Narasimham Committee. The current SLR is
21.5%(w.e.f.03/02/15).
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Bank Rate:
Bank Rate is the rate at which central bank of the country (in
India it is RBI) allows finance to commercial banks.
Bank Rate is a tool, which central bank uses for short-term
purposes.
Any upward revision in Bank Rate by central bank is an
indication that banks should also increase deposit rates
as well as Base Rate / Benchmark Prime Lending Rate.
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Open Market Operations
An open market operation is an instrument of monetary policy which involves buying or selling of government securities from or to the
public and banks. The RBI sells government securities to control the flow of credit and buys government securities to increase credit
flow. Open market operation makes bank rate policy effective and maintains stability in government securities market.
Deployment in Credits
The RBI has taken various measures to deploy credit in different sector of the economy. The certain %age of the bank credit
has been fixed for various sectors like agriculture, export etc.
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Credit Ceiling
In this operation RBI issues prior information or direction that loans to the commercial banks will be given up to a certain limit.
In this case commercial bank will be tight in advancing loans to the public. They will allocate loans to limited sectors. Few
example of ceiling are agriculture sector advances, priority sector lending.
Moral Suasion
It is just as a request by the RBI to the commercial banks to take so and so action and measures in so and so trend of the
economy. RBI may request commercial banks not to give loans for unproductive purpose which does not add to economic
growth but increases inflation.
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Analysing Conditions - Non Economic
Political Factors
Includes political system, government policies and its attitude towards business community.
Stability of government also affect business activities.
Swavalamban Yojana
seeks to provide pension scheme to the unorganised sector in India.
Sukanya Samriddhi :
Girl children scheme in which handing over passbooks to five year girls who have opened bank accounts under the scheme
and 9.1 per cent interest rate for the scheme for 2014-2015.
Consumers need to have bank account to join the PAHAL scheme and to receive LPG subsidy.
Pradhan Mantri Jan-Dhan Yojana
(PMJDY) is a scheme made to benefit comman man by opening zero balanace bank account.In this scheme accidental cover
of 1 lac and life insurance of 30000 is given
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Analysing Conditions - Non Economic (ctd.)
Demographic Factors
Change in lifestyle: lifestyle in india is changing rapidly and demanding high class products therefore they will start
taking loans from banks to fulfill their demands.
Aging population:
As aging population is increasing demand for medical insurance ,pension plans or retirement fund plan are
increasing. the elderly population in 2009 was approximately 88 million and is expected to sharply increase to
more than 315 million by 2050.
Young population:
As young population is increasing demand for loan,saving, are increasing. With 356 million 10-24 year-olds, India
has the world's largest youth population despite having a smaller population than China.
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Analysing Conditions - Non-Economic (ctd.)
Socio-Cultural Factors
It includes cultural aspect and health consciousness ,career attitudes and emphasis on safety.
Change in lifestyle:lifestyle in india is changing rapidly and demanding high class products therefore they will start
taking loans from banks to fulfill their demands.
No of festivals: more no of people are taking loans
● Literacy rate:Illiterate people hesitate to transact with
banks. As literacy rate is increasing banking transact will
increase. Literacy in India is a key for socio-economic
progress, and the Indian literacy rate has grown to
74.04% (2011 figure) from 12% at the end of British rule
in 1947.
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Analysing Conditions - Non-Economic (ctd.)
Technological Factors
Automated teller machine: The use of atm and internet banking has allowed ‘anytime ,anywhere banking’ facilities
and has encouraged customers to use banking.
Credit card facility has encouraged era of cashless society and has encouraged customers to use credit and debit
card.
It services & mobile banking: technology advancement has changed the face of traditional banking. technology
advancement has offer 24*7 banking even giving faster and secured service.
Legal Factors
The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India
The Export-Import Bank of India Act,1981:An Act to establish a corporation to be known as the Export-Import Bank of India
for providing financial assistance to exporters and importers
The Small Industries Development Bank of India Act, 1989: An Act to establish the Small Industries Development Bank of
India as the principal financial institution for the promotion, financing and development of industry in the small-scale sector.
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Banking Current Affairs 2015
The RBI has allowed third-party white label automated teller machines (ATM) to accept international cards, including
international prepaid cards, and said white label ATMs can now tie up with any commercial bank for cash supply.
The RBI has allowed banks to become insurance brokers, permitting them to sell policies of different insurance firms subject to
certain conditions.
The RBI has allowed bonds issued by multilateral financial institutions like World Bank Group, the Asian Development Bank
and the African Development Bank in India as eligible securities for interbank borrowing.
The RBI has decided to allow nominated banks to import gold, including coins, on a consignment basis, extending its
clarification issued in November 2014, which had eased certain categories of gold imports.
The Government has announced a capital infusion of Rs 6,990 crore (US$ 1.1 billion) in nine state run banks, including State
Bank of India (SBI) and Punjab National Bank (PNB), but based on new efficiency parameters such as return on assets
and return on equity.
The Union cabinet has approved the establishment of the US$ 100 billion New Development Bank (NDB) envisaged
by the five-member BRICS group
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Challenges for The Indian Banking System
The banks are the lifelines of the economy and play a catalytic role in activating and sustaining economic growth,
especially, in developing countries and India is no exception. Our banking system, at the present juncture is, however,
facing significant challenges from several quarters.
Capital Adequacy of Banks:
Concerns have been raised about the ability of our banks to raise additional capital to support their business.
For the system as a whole, the CRAR has been steadily declining and as at the end of March 2015, it stood at 12.70% as
against 13.01% as at the end of March 2014.
Our concerns are larger in respect of the PSBs where the CRAR has declined further to 11.24% from 11.40% over the last
year.
Revision to the Priority Sector Lending Guidelines:
The banks are now required to progressively achieve 8% of lending to Small and Marginal Farmers and 7.5% to the micro
enterprises among the MSEs in a phased manner.
Global Banking and Intense Competition:
If we look at the Indian Banking Industry, then we find that there are 36 foreign banks operating in India,which becomes a
major challenge for Nationalized and private sector banks.
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Challenges for The Indian Banking System (ctd.)
Privacy and Security:
Concerns have been raised about the ability of our banks to raise additional capital to support their business.Credit Card
Forgery, Cyber Security.
The instances of fake e-mails soliciting unsuspecting customers to make payments to certain bank accounts as a precursor to
receiving prize or lottery winnings from abroad, have become quite rampant.
Technology and its Impact:
PSBs are not able to cop up with the fast moving technology and thus they are losing their customer share to the private
Banks. The challenge before the PSBs is to upscale their capabilities, train their employees on the new technologies to
benefit from the possibilities that adoption of technology can open up.
Rural Capital:
Banking in India is generally fairly mature in terms of supply, product range and reach, even though reach in rural India still
remains a challenge for the private sector and foreign banks. As per Census 2011, 58.7% households (67.8% urban &
54.4% rural ) are availing banking services in the country. Thus, a significant proportion of the households, especially in
rural areas, are still outside the formal fold of the banking system.
41

Global Banking Outlook
The retail banking segment registered significant growth during 2006-2011 and has excellent potential to grow at an even
more rapid pace over the forecast period.
Europe dominates the global banking industry with 43% of total market share.
The Asia Pacific banking industry, however, grew much faster than both the European and North American regions during
2006-2011. Rising per capita income in the region is expected to drive consumer savings and investment in banking
sector.
The massive unbanked population in India and China offers immense opportunity for banking companies. The North American
banking industry is anticipated to grow modestly in the near term.
Rising middle class populations and escalating household incomes in emerging markets provide substantial opportunity for
global banks. Rapid technological advances are leading to dramatic shifts in the banking industry as the processing cost
per transaction is approaching zero while simultaneously improving efficiency. These advantages are likely to increase
trading volumes at the institutional level.
42

International Banking Institutions
International banking and financial organizations exist to encourage economic and financial stability, help facilitate trade, and
help with economic development.
The World Bank:
It was originally formed shortly after World War II in an effort to rebuild the economies of war-torn countries, but its mission is
now global in scope.
The World Bank is actually comprised of two institutions. The International Bank for Reconstruction and Development
(IBRD), which provides low-interest and no-interest loans to developing countries who cannot get financing elsewhere.
The other part of the World Bank is the International Development Association, or IDA. The IDA was started in 1960. It
works with the IBRD and focuses its efforts on the poorest countries in the world.
International Monetary Fund:
The International Monetary Fund, commonly referred to as the IMF was created in 1944 and currently has about 188
member countries.
One goal of the IMF is to promote international cooperation on international monetary policy.
The IMF also tries to encourage the expansion of international trade and promote currency exchange stability. Currency
exchange rate stability means that the value of one currency in relation to another is fairly stable.
43

Banking Facts - Globally
The global banking industry faces short-term uncertainty due to the debt crises that challenge several major
economies, but total industry assets are forecast to climb to an estimated US $163,058 billion in 2017 with a
CAGR of 8% over the next five years.
In the recent years the banking industry assets in the emerging markets of the Latin America region and Asia-Pacific
grew the most in 2012, at 20.5% and 9.5%, respectively. In contrast to this, while North America grew by 6.1%,
during the same period Europe declined marginally by 0.5%
As per latest data there are more than 5,498 banks active in 138 host countries for the period 1995-2013, of which
3,853 were active in 2013.
Worldwide, 62% of adults now have an account at a formal financial institution (such as a bank) or a mobile money
account, up from 51% in 2011.
The assets of the largest 1,000 banks in the world reached USD 96.4 trillion in 2009.
44

Banking Facts - Globally (ctd.)
This chart shows the banking sector in terms of assets as a percentage of GDP for several continents. What stands
out, are the extremely large banking sectors in European countries. (Aug 2013 Data)
45

Next Decade Trends
The next decade in banking will see both evolution and revolution. Banks must reinvent themselves, not just to respond to the
pressures of today, but to be flexible enough to adapt to the world of tomorrow.
The Transformation is necessary because banks face an array of stakeholder pressures. They must find a way to deliver
improved performance for investors who have tired of high volatility but low returns on equity.
New markets: the emerging will have emerged:
By 2030, many markets currently dubbed emerging or growth markets will have reached maturity. In Asia, Latin America and
Africa, a new set of high-growth markets will have taken their place.
Customer relationships (more personal, greater trust):
Customers are taking more control of their financial relationships, and this trend is unlikely to change. By 2030, banks will
deepen their personal connections with customers via data analysis techniques that might seem fantastic by today’s
standards.
Trade flows:
Because most trade takes place within regions, global banks will need to leverage the expertise of strong regional partners..
46

Next Decade Trends (ctd.)
Changing Workforce:
Working patterns and employee expectations are changing, particularly for a new generation entering the workforce for the first
time. Banks would have to bring transformations such that Banking Job become more Glamoured and High-Tech.
Technology Reshaping Business:
In the past decade, technology has completely transformed banking. Over the next decade, it will continue to do so. This is
critical to drive efficiency, productivity and speed to market. Banks should focus on Smartphone penetration and other
factors like Digital Payments.
Payments (new markets and new models):
Technology is changing the payments segment of the banking industry at an extraordinary rate.
Competition from Nonbank Payment Service Providers offering services like mobile banking.
Customer demand for quicker, cheaper, anytime/anywhere payments.
More transactions managed through exchanges affected by regulation of over-the-counter derivatives.
47

A new era of Competition:
Expansion in the emerging markets would be complicated. Due to the Domestic players dominancy in most of these countries,
international banks must consider what more they can offer customers and how they can differentiate themselves from
local institutions. Furthermore, many emerging markets are hard to operate in — with legal and regulatory frameworks that
do not suit large global banks So International Banks need to challenge these competition through the Merger and
Acquisition Strategies, so that they can bring on board their technology and efficiency to these well connected Domestics
Banks.
Financing Energy Sector:
Political and environmental factors related to energy production, combined with new technology, will require new financial
products. These are likely to encompass financing and fundraising support for large energy projects.
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Demographics (an older, more urban generation):
Demographics will drive the future of banking. Forecasts indicate that global inhabitants will surpass 8 billion by 2030, a
population that will be ever more elderly. New banking business models will be needed to serve this aging, and
increasingly urban, demographic.
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Conclusion
The pre and post liberalization era has witnessed various environmental changes which directly affects the aforesaid
phenomena. It is evident that post liberalization era has spread new colours of growth in India, but
simultaneously it has also posed some challenges
The biggest challenge for banking industry is to serve the mass and huge market of India. Companies have become
customer centric than product centric. The better we understand our customers, the more successful we will be
in meeting their needs
Apart from traditional banking services, Indian banks must adopt some product innovation so that they can compete
in gamut of competition. Technology up gradation is an inevitable aspect to face challenges.
Also in coming decades we may be able to see Indian Banking Sector rise to top positions. For Indian Banks like
ICICI and SBI which are ambitious about going globally by setting up branches in China, it’s important for them
to start adopting expansion strategies of Foreign Banks.
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