Indian Banking and Finance Sector gearing for a makeover

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Bandhan Financial Services becomes first micro-financing institution to get Banking License 

Indian Banking and Finance SectorThe Indian economy has been famous for its crisis withstanding capacities (2008 global economic downfall-a great example). According to RBI (Reserve Bank of India) also known as the Central Bank Authority of the nation indicates that the banking system is healthy as it is systematically organized and adequately capitalized. The organized operations and advance planning help in keeping the system strong and stable and thus the banks are able operate even in the toughest conditions such as a world economic struggle.

RBI time and again works on its strategies-rebuilding the policies and taking up fresh measures that insure betterment of the banking and financial systems within the country. The restructuring of domestic banking bodies is one such recent activity which the RBI has announced and is working on.

Market Size

Indian Banking and Finance scenario is highly volatile as state owned banks control 80% of the business in the country. Apart from them, there are 46 commercial banks that are fighting for their share of business along with some 12 well-known foreign banks. Rural co-operative lenders also have a certain share.

Even though the banking facilities are strong and developing further, the number of account holders in India is comparatively low.

The Pradhanmantri Jan Dhan Yojana is an effective initiative started by the new government which within a few days had around 14 crore accounts. More than 12 crore RuPay debit cards were issued under this scheme. This is actually an effort to pull in common and the poor grade of the society towards having a bank account; under this the bank holder is required to deposit a minimum of Rs.12 annually for which s/he will be eligible of an interest and their nominees can avail an insurance sum of Rs. 2 lakhs after them. Around $2.01 billion (12,694 crore INR) was collected as deposits in the initial days of starting the scheme.

The Indian Banking sector is estimated to have an improved growth rate of 12-13% by 2016; whereas in 2014 this growth rate didn’t exceed 10%.

Government Initiatives:
There are several initiatives undertaken by the Government of India in the banking sector making it one of its priorities.

RBI has prepared a list of banks and allowed them to import gold (including gold coins). This is allowed to be carried on a consignment basis. This allowance is permitted only to extremely well performing banks.

The government has announced combination of capital of Rs.6, 990 crore INR ($1.1 billion) to few state run banks for their excellent performance in the previous financial year.

Private Players are active too:

RIL (Reliance Industries Limited) has got its license for payment banking cleared and is working on a deal where it will be promoting State of India as a joint venture partner with a maximum investment sharing of upto 30% into equity funding.

There are lot of mergers happening in the Indian banking sector; latest being the 2.36 billion (15,000 crore INR) deal between ING Vysya Bank and Kotak Mahindra Bank. This is estimated to be India’s 4th largest merger deal in the private banking sector.

Yes bank has partnered with US government’s development finance institution- Overseas Private Investment Corp (OPIC). This is a deal of financing multiple Micro, Small and Medium businesses in India. This project is worth $ 200 million and is believed to enhance the status of Indian Banking within the next decade.

Apart from these, RBI is constantly undertaking actions in order to increase investments in the banking finance sector and provide quality services to the massive population which is still untapped even after so many years post-independence.

Allowance of third-party white labeled automated teller machines (ATMs) to accept international cards (also international prepaid cards) and cards from multiple banks is seen as a massive step towards taking the ATM usage to another level. All ATMs can tie up with any commercial bank for cash supplies which wasn’t allowed in the past.

Understanding the growth of e-commerce in India, banks are welcoming tie-ups with few leading online portals

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The future of Banking and Finance:
Automated services like Internet Banking and Mobile Banking have created a healthy environment for the entire industry. All banks have opted for the technology and are offering first-grade services to their clients thus improving their customer service standards. Apart from the technology, there is a massive upgrade in the infrastructure which has tuned to be must both in the public and private sector banks.

Few private banks are working on the launch of “contact less” credit and debit cards wherein using the ‘Near Field Technology’ (NFC) the users will be able to carry on the transaction with even inserting or swiping the cards. The mobile payment technology is another big card which is still to be explored in India.