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RECENT TRENDS IN BANKING

INDUSTRY IN INDIA
Introduction
The Indian Banking Industry is governed by the Banking
Regulation Act of India, 1949. As a whole India has now a far more
developed and integrated banking system with large number of
banks in the country.
1) Structure of Banking Industry in India
Banking industry in India is classified into scheduled and Nonscheduled banks. Scheduled banks consist of State Co-operative
banks and Commercial banks. The non-scheduled banks consist of
Central Co-operative banks and primary credit societies and
commercial banks.
2) Public sector banks in India
The public sector banks consist of SBI and its associated banks,
nationalized banks including IDBI and Regional Rural Banks. By
2012 there were 26public sector banks with 84,546 branches out
of which 41.1% were rural branches consisting of State Bank of
India and its 6 associated banks, 19 nationalized banks and IDBI
Ltd.
Public sector banks are the mainstay of the Indian Banking
System. On account of many measures taken by the government
the capital adequacy ratio of public sector banks has risen from
11.2% in 2001 to 13.1% by Basel II. Similarly the asset quality as
shown by level of NPAs has improved.
3) Private sector Banks in India.
The private sector banks consists of 14 old and 7 new the private
sector banks with 13,667 branches with 11.8% rural branches by
2012. The capital adequacy ratio of old private sector banks has
risen from12.5% during Basel I to 14.1% during Basel II and that
of new private sector banks have risen from 14.9% to 16.7% .
4) Foreign banks operations in India:

As at end June 2012, 41 foreign banks of 24 countries were


operating in India with 323 branches with 2.2% rural branches.
The capital adequacy ratio of foreign banks in India was 17.3 %
during Basel I and 16.7% during Basel II.
5) Regional Rural Banks :
The origin of RRBs can be traced back to the promulgation of
RRB Act of 1976.They are established with the specific objective
of providing credit and deposits facilities particularly to the small
and marginal farmers , agricultural laborers and artisans and
small entrepreneurs. The RRBs have the responsibility to develop
agriculture, trade, comers and industry in the rural areas. In 200910 there were 82 RRBs.
6) Indian Banks Operation Abroad:
Indian banks continued to expand their presence overseas.
Indian banks
undertake overseas operations
through branches, subsidiaries, representatives offices and joint
venture banks. The overseas operations of Indian banks have
risen to 250 in 2011-12 to with 215 public sector and 35 private
sector banks.
7) Local Area banks.
The local area banks (LABs) Scheme was introduced in august
1996. The objective behind setting up of new private local banks
was to help the mobilization of rural saving by local institutions
and make them available for investments in local areas. There
were 4 local area banks in the country at end march 2010.
8) Priority sector landing:
Domestic scheduled commercial banks, both public and private
sectors, are required to meet a target of 40 percent of their
adjusted net bank credit for lending to the priority sector. Foreign
banks having offices in India target for lending to the priority

sector is 32 % of Adjusted Net Bank Credit. Within this target, the


advances to micro and small enterprises and export sectors
should be 10 % and 12% of the ANBC respectively.
9) Overall performance of the banking industry:
The balance sheets of scheduled commercial banks (SCBs) in
India remained robust against the backdrop of global financial
crisis. The consolidated balance sheets of SCBs increased by 21.2
percent as at end March 2009 as compared with 25 % in previous
year. While the balance sheet of public sector banks maintained
their growth momentum, the private sector banks and foreign
banks registered a deceleration in growth rate in 2008. However
in 2009 10 there was slowdown in the growth of balance sheet
of public sector banks, old private sector banks and foreign banks.
10) Use of technology in banks:
The banks in India are using information technology not only to
improve their own internal processes but also to increase facilities
and services to their customers. The proportion of public sector
banks branches which achieved full computerization increased
from 93.7 % as at end march 2008 to 97.8 % as at end of March.
More and more ATMs are installed in the country.
11) No frills Accounts:
In order to provide financial inclusion , the RBI advised all banks in
November 2005 to make available a basic banking no frills
account either with nil or low minimum balances as well as
charges. The number of no frills account opened by SCBs has
risen from 67.3 lakhs at end of March 2007 to 330.2 lakhs as at
end of March 2009.
12) Introduction of base rate system of interest rates:
RBI introduced the system of base rate since July 1, 2010. Base
rate includes all those elements of the lending rates that are

common across all categories of borrowers. The actual lending


rate charged to borrowers would be the base rate plus borrowers
specific charges.
Conclusion: as whole India as now a far more developed and
integrated banking system with large number of banks in the
country.

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