As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in the country are far superior to any other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking models like payments and small finance banks. RBI’s new measures may go a long way in helping the restructuring of the domestic banking industry.
The digital payments system in India has evolved the most among 25 countries with India’s Immediate Payment Service (IMPS) being the only system at level five in the Faster Payments Innovation Index (FPII).*
The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks in addition to cooperative credit institutions As of September 2021, the total number of ATMs in India reached 213,145.
In FY18-FY21, bank assets across sectors increased. Total assets across the banking sector (including public and private sector banks) increased to US$ 2.48 trillion in FY21.
In FY21, total assets in the public and private banking sectors were US$ 1,602.65 billion and US$ 878.56 billion, respectively.
During FY16-FY21, bank credit increased at a CAGR of 0.29%. As of FY21, total credit extended surged to US$ 1,487.60 billion. During FY16-FY21, deposits grew at a CAGR of 12.38% and reached US$ 2.06 trillion by FY21.
According to the RBI, bank credit stood at Rs. 110.46 trillion (US$ 1.47 trillion) and credit to non-food industries stood at Rs. 109.82 trillion (US$ 1.46 trillion) as of September 24, 2021.
Key investments and developments in India’s banking industry include:
Following are the achievements of the Government:
Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth in the banking sector. All these factors suggest that India’s banking sector is poised for a robust growth as rapidly growing businesses will turn to banks for their credit needs.
Also, the advancement in technology has brought mobile and internet banking services to the fore. The banking sector is laying greater emphasis on providing improved services to their clients and upgrading their technology infrastructure to enhance customer’s overall experience as well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion by FY23 driven by the five-fold increase in the digital disbursements. By 2025, India's fintech market is expected to reach Rs. 6.2 trillion (US$ 83.48 billion).
References: Media Reports, Press releases, Reserve Bank of India, Press Information Bureau, www.pmjdy.gov.in
Note: Conversion rate used in November 2021, Rs. 1 = US$ 0.01336
Note: * - according to an FIS report, # - Microfinances Institution Network
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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