Reverse Innovation -Application in Banking Sector

A couple of decades of economic and financial sector reforms have strengthened the fundamentals of the Indian economy and transformed the operating environment for banks and financial institutions in the country. The sustained and gradual pace of reforms has helped avoid any crisis and has actually fuelled growth. The most significant achievement of the financial sector reforms has been the marked improvement in the financial health of commercial banks in terms of capital adequacy, profitability and asset quality as also greater attention to risk management. Further, deregulation has opened up new opportunities for banks to increase revenues by diversifying into investment banking, insurance, credit cards, depository services, mortgage financing, securitization, and so on. At the same time, liberalization has brought greater competition among banks, both domestic and foreign, as well as competition from mutual funds, NBFC's, and other financial institutions. Increasing competition is squeezing profitability and forcing banks to work efficiently on shrinking spreads. Because banks still play an important role in the financial market, it is important to evaluate whether banks operate efficiently. In order to compete with other financial institutions, banks must increase their levels of efficiency. The researcher tries to apply the concept of Reverse Innovation in the banking sector in India as a measure for efficiency improvement of banks.