Banking is the heart of India's financial services sector. The banking industry has undergone numerous changes over the past few years to be at par with international banking norms and standards. While the banks' motive has shifted from social banking to profit banking, dependence on ledgers, documents, cheques and slips has been replaced by electronic initiatives or cashless banking. Earlier customers used to approach banks to avail their services, but now banks approach them to market their offerings. With increasing competition and better quality of services, customised service solutions seem to be the future of banking.
Mr Fred Hochberg, the US Exim Bank Chief, feels strong about India's long-term growth prospects. Exim Bank's exposure to India is US$ 8.5 billion of its total portfolio of US$ 108 billion and the concentration in India is expected to get bigger in 2013-14.
Government Initiatives
The ministry of Finance is believed to have infused Rs 12, 517 crore (US$ 2.28 billion) into 13 public sector banks before March 2013, in order to keep them adequately capitalised. In 2013-14, it proposes to provide additional capital of Rs 14, 000 crore (US$ 2.55 billion) to ensure that public sector banks always meet the Basel III regulations as they come into force in a phased manner.
The Government is also working with the RBI and NABARD to bring all banks, including some co-operative banks on core banking solution (CBS) and on the electronic payment systems (like NEFT and RTGS) by the end of 2013. All scheduled commercial banks and all regional rural banks (RRBs) are already on CBS.
Apart from this, the ministry is also contemplating to come up with India's first Women's Bank as a public sector bank and shall provide Rs 1, 000 crore (US$ 182.45 million) as initial capital. Necessary approvals and banking licence are expected to be obtained by October 2013.
The Government intends to provide Rs 6,000 crore (US$ 1.09 billion) to the Rural Housing Fund in 2013-14 while it may start a fund for urban housing to mitigate the huge shortage of houses in urban areas. It would provide Rs 2,000 crore (US$ 364.89 million) to the Fund in 2013-14.
Road Ahead
Mr P Chidambaram, the Finance Minister, has indicated that there is a rising demand for opening bank branches in Indian towns and villages. More bank branches mean more mobilisations of savings and higher investments in the economy. On an average, about 6, 000 branches were being opened every year in the last 2-3 years and there's a plan to open more of them in 2013-14.
Moreover, with the Parliament passing the much awaited Banking Laws Amendment Bill recently, the face of the Indian banking industry is set to get a lift in the coming years as the passage of the bill has paved the way for more banks. This will not only create a healthy competition among the players in the industry, but will also escalate the style of operation and technology.
Exchange Rate Used: INR 1 = US$ 0.01824 as on April 6, 2013
References: Media Reports, Press releases, RBI Documents.