Banking sector in India: Changing practices in the global scenario

The Banking sector in India has experienced a rapid transformation. Just about a decade back this sector was limited to the sarkari (read nationalized) and co-operative banks. Then came the multi-national banks, but these were confined to serving an elite few. One could regard the past as the ‘medieval ages’ in the banking industry, wherein every branch of the same bank acted as an independent information storage tower, and multi-channel banking (ATMs, Net banking, telebanking, etc) was almost non-existent. The enhanced role of the banking sector in the Indian economy, the increasing levels of deregulation and the increasing levels of competition have placed numerous demands on banks. Operating in this demanding environment has exposed banks to various challenges. In recent years, the banking industry has been undergoing changes, reflecting a number of ongoing reform processes. The most significant has been far reaching developments in telecommunication and information technology, which have accelerated and broadened the dissemination of financial information while lowering the costs of many financial activities. Future belongs to technology, cheaper delivery points like Internet and tele-banking to improve their market share. Another key impetus for change has been the increasing competition among a broad range of domestic and foreign institutions in providing banking and related financial services. Growing internationalization and opportunity in financial services has entirely changed the competitive landscape, as now many banks have demonstrated a preference to offer a one-stop-shop- “Universal Banking” model- so prevalent in Europe. Today the country is flooded with foreign banks and their ATM stations. Phone banking, net banking and many more products and facilities in the banking sector is also introduced in its reforms measure. The entire system became more convenient and swift. Today banks have redefined their business priorities. They are now focused on cost reduction, product differentiation and customer-centric services.