Changing Landscape of Banking Sector in India | Finance & Management for RBI Grade-B Main

India’s banking sector has undergone a paradigm shift, especially in the last two decades. It has evolved a lot in terms of asset quality, technology, and regulations. It has shifted from physical banking, which involved customer walk-ins and face-to-face interactions to digital anchors, involving branchless banking made possible by new-age, contactless technologies.

As a banking aspirant, who wants to join the Reserve Bank of India at a managerial level, you should be well-informed about the changes that are taking place in the banking sector, both the immediate change and the transitional ones. We’ll here look at the macro picture of how the banking sector has evolved over the last few decades.

The Changing Landscape of Banking Sector in India

The digital revolution has played an important role in shaping the growth trajectory of the banking sector in India—from promising unprecedented customer experiences to ensuring extraordinary gains in productivity.

Especially, if we evaluate the post-demonetization phase, the finance industry has witnessed a significant shift towards digitization; and its stakeholders are now better equipped in using the technology at their disposal.

Next, we will discuss the recent developments in the banking sector:

Financial Inclusion

Financial inclusion refers to the availability and equality of opportunities to access financial services. It acts as a key driver in the economic growth and development of any nation. The Government of India, on pursuance of the RBI, is actively propagating financial inclusion through various schemes. Some of the government-run schemes to enhance the outreach of financial services in India include:

  1. Pradhan Mantri Jan Dhan Yojana (PMJDY)
  2. Atal Pension Yojana (APY)
  3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
  4. Stand Up India Scheme
  5. Pradhan Mantri Mudra Yojana (PMMY)
  6. Pradhan Mantri Suraksha Bima Yojana (PMSBY)
  7. Sukanya Samriddhi Yojana
  8. Jeevan Suraksha Bandhan Yojana

To read more about financial inclusion, click here.

Use of Technology

Technology is yet another important element that the banking sector in India is leveraging to enhance its productivity. The adoption of Core Banking Solutions (CBS) in 2002 for the incorporation of sophisticated technological solutions was an important step towards using technology to enhance the banking sector. CBS has not only enabled bank-to-client interactions but has also facilitated the calculation of penalties, interests, and maturity, etc. Next, with the coming of the digital age in 2011, technological integration has been raised a notch higher to enable unprecedented customer experience. Some of the current digitally-enabled government-approved banking platforms are:

  1. Unified Payment Interface (UPI)
  2. Bharat Interface For Money (BHIM)
  3. National Unified USSD Platform
  4. Aadhar Enabled Payment System

Recent Bank Mergers

Another change that the banking sector in India is witnessing is structural in nature. The Government is reducing the number of Public Sector Banks by announcing mega-mergers. Subsequently, the number of public sector banks in India has been reduced to 12 from 27.
Here’s the list of public sector bank mergers (until April 2020):

  1. In April 2019, Vijaya Bank and Dena Bank have merged with Bank of Baroda
  2. The 6 SBI associates and Bhartiya Mahila Bank merged with the State Bank of India
  3. With effect from April 1, 2020, United Bank of India and Oriental Bank of Commerce have merged with Punjab National Bank making it the second-largest public sector bank in India
  4. With effect from April 1, 2020, Syndicate Bank has merged with Canara Bank.
  5. With effect from April 1, 2020, Allahabad Bank has merged with Indian Bank
  6. With effect from April 1, 2020, Andhra Bank and Corporation Bank of India have merged with Union Bank of India

You should have a thorough understanding of these changes, their implications, and so on, both from the Mains Exam and Interview point of view.

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