The Indian banking sector has grown significantly in the last three decades, expanding its business activities beyond traditional banking. Mobile banking transactions in India are expected to reach $350 billion by 2015. Several government initiatives have been taken to improve banking regulation and increase access to financial services in rural areas. With India's continued economic growth and increasing consumer spending, the banking sector is poised for further expansion to capture the growing demand.

1. Indian Banking – Trends& Developments<br />The last three decades have demonstrated a significant increase in the size, spread and scope of activities of banks in India. The business profile of banks has changed significantly to include non-traditional activities such as merchant banking, new financial services, mutual funds, etc. The evolution from class banking to mass banking and rising customer focus is immensely changing the landscape of Indian banking.<br />Payments and banking transactions through mobile phones in India are likely to reach US$350 billion by 2015, according to global management consulting firm, The Boston Consulting Group (BCG). This, in turn, will provide banks, telecom operators, device makers and service providers an opportunity to earn fee income of US$4.5 billion<br />With an objective of increasing the financial inclusion, the SBI has opened 21 new branches, besides, 101 new Automatic Teller Machines (ATMs) and 400 green channel counters.<br />Around 350,000 villages spanning the entire India would have access to financial services offered by banks in the next two financial years, according to a plan given by banks to the RBI. RBI has directed banks to ensure that 223,473 villages have access to basic financial services by March 2012<br />Three local banks have partnered with a global financial technology firm - Polaris Software with its headquarters in India - to establish a joint venture IT company in Bangladesh. The company would start with providing software solutions to these three banks before selling customised services to other banks, non-bank financial institutions and insurance companies<br />Indian Banking – Key Investments<br />Standard Chartered Private Equity (SCPE) said that it has invested US$ 56 million in Ravi Jaipuria-promoted Varun Beverages International (VBIL), buying a quot;
significant minorityquot;
stake in the bottling firm. The funds would be used to fast-track VBIL's growth in its beverages business in India and in foreign countries<br />South Indian Bank has signed a service agreement with TimesofMoney, an e-payments service provider to offer remittance solutions to Non Resident Indians (NRIs) in selected countries. The service would enable NRIs to get a strong transaction platform along with better pricing and safety, besides speedy money transfer<br />Government Initiatives<br />The policy makers for the banking sector, 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. These changes include:<br />Strengthening prudential norms<br />Developing the payments system and,<br />Integrating regulations between commercial and co-operative banks<br />To support capitalisation, the government has infused Rs 23,200 crore (US$ 5.2 billion) into state-owned banks during the last three fiscals<br />The RBI has said that for each branch that is proposed to be opened in Tier 3 to Tier 6 centres of under-banked districts of under-banked States, a bank will get the authorisation to open a branch in a Tier 1 or Tier 2 centre. This incentive to banks comes on the back of the continuing need to open more branches in these States in order to ensure more uniform spatial distribution<br />With financial inclusion being a key program for RBI and the government, the central bank has decided to give private banks a push to go rural. The RBI has, in its circular, said that banks should open at least 25 per cent of the branches under the annual branch expansion plan in un-banked rural centres.<br />Indian Banking - Road Ahead<br />2489835970280The Indian banking story is running in parallel with India’s growth story. With economic growth of India expected to average at double-digit for the current decade, the banking sector is also poised for growth as the factors contributing to the growth of GDP would act as catalysts for the banking sector as well – in retail, corporate as well as rural banking. By 2017, the average consumption in rural India will be the same as of urban India in 2005, according to a McKinsey study. As a result, India’s labour force will grow at a higher rate than population growth and therefore, the ratio of working age population to total population will be on the rise, and it will be more urban, rich and educated. This will result in a higher flow of savings to the banking system. <br />Consumer credit is expected to drive future growth of the sector. Further, India’s mortgage loan and wealth management business will grow 10 times by 2020, according to the estimates put by Boston Consulting Group (BCG). An under penetrated market, both in terms of number of accounts and number of borrowers, the banking segment in India holds huge potential for the future. <br />Global banking giant Standard Chartered on Wednesday said India could emerge as the world's third largest economy by 2030, benefiting from strong domestic demand and favourable demographics.<br />However, the banking entity noted that country's reform agenda need to be sustained for achieving high growth.<br />quot;
India has the fundamentals to emerge a winner in the super-cycle, potentially becoming the world's third-largest economy by 2030.<br />India is likely to grow faster, on average, than China over the next two decades,quot;
Standard Chartered Global Research said in 'India in the Super Cycle'.<br />In 2010, the world's major economies were USA ($14.6 trillion), China ($5.7 trillion) and Japan ($5.4 trillion). India did not figure among the top ten, as per International Monetary Fund data.<br />Financial sector openness is expected to be directly linked to economic growth<br />through enhancing the access to financial services, and indirectly through increasing<br />competitiveness of domestic financial markets, both of which reduce the cost of financing.<br />This, in turn, spurs economic growth through higher capital accumulation and higher<br />efficiency.<br />