The banking industry is one of the prominent indicators of the health
of an economy. A bank’s ability and freedom to borrow from other
banks and lend to corporates has a great impact on the growth rate
of the economy. Deregulation of US banks in the 1970s was followed
by a drastic change in US banking – banks became larger and better
diversified. Soon banks of other developed nations also began to operate
in more competitive markets. Developing countries also followed suit
in the last decade of the 20th century.
Similar to the US, the Indian banking industry too has undergone several
changes since the initiation of financial sector reforms in 1992.
Deposits and credit have grown at a fast pace driven by the booming
economy, increasing disposable income and increased corporate activity;
credit penetration has increased significantly though it remains way
below the numbers in developed markets; and foreign banks have set
the trend in product and service innovation.
The future of Indian banking looks quite exciting with
Indian Banking –
Post-liberalisation, the banking industry in India has grown at a
fast pace. Increased economic activity coupled with de-regulation
has further strengthened the position of Indian banks. By the end
of March 2006, the total deposits held by the scheduled commercial
banks stood at INR 21 lakh crores, a growth of 15.8 percent over 2005
and a compound annual growth rate (CAGR) of 14.9 percent since 2001-02.
Moreover, the growth has not been restricted to any specific sector,
all sectors (public sector, private sector and foreign) have shown
good growth. The total loans and advances offered by commercial banks
grew by 36 percent between March 2005 and March 2006 to reach INR
15 lakh crores, recording a CAGR of 23.6 percent since 2001-02.
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