India finance
Presently, the banking situation in India is overall fair in nature, both in terms of product range and supply. However, the reach of the banks in the rural area is still a challenge both for the foreign and the private sector banks. As compared to the banks functioning in the neighboring nations, the Indian banks, both in terms of capital adequacy and assets are considered to have a strong, clean and transparent balance sheet. With minimal amount of government pressure, the Reserve Bank of India is an autonomous body. The policy of the bank on the Indian rupee is the management of volatility, without any sort of fixed exchange rate.
Thanks to the expected strong growth in the Indian economy and especially, in the service sector, the demand in banking services, investment services and mortgages would be considered to be strong. In addition, an individual would also expect takeovers, asset sales and M& ;As.
Increase in Private Investor Stake :
In the year 2006, the Reserve Bank of India permitted Warburd Pincus for increasing the stake in a private sector bank, namely Kotak Mahindra Bank to 10 %. It was the first time that any investor was granted permission to hold an excess of 5 % in a private financial institution, mainly from the time of announcement of the RBI norms in the year 2005, which had mentioned that any sort of stake which would exceed beyond 5 % would be inspected by them.
Presently, India has as much as 88 Scheduled commercial banks, of which 29 are private sector banks and 28 are government sector banks. These also include 31 foreign banks. These branches alone have a combined network of more than 17,000 ATMs and 53,000 branches. Based on a report prepared by the rating agency by the name ICRA, more than 75 % of the total assets of the banking industry are held up by the public sector banks. The foreign and private sector banks hold 6.5 % and 18.2 % respectively.
Status of banks during the Post-Independence Era:
From the 1960s period, the banking industry in India has become an essential tool for facilitating the development in the Indian economy. Around the same time, it also came up as a large employer and a debate arose for the nationalization of the banking industry. The then prime minister of India, Smt. Indira Gandhi conveyed her intention in the All India Congress Meeting with the help of a paper, which was aptly titled Stray thoughts on Bank Nationalization. It received a positive enthusiasm. Thereafter, she took a sudden and a swift move of nationalizing 14 largest commercial banks from 19th July, 1969. This was followed by the second phase of nationalization in the year 1980. The reason stated for such maneuver was that, the government gets to exercise more control over the credit delivery. With the second phase of nationalization, the government took control of 91 % of the Indian banking business. Till the 1990s, the average growth rate of the nationalized banks reached 4 %. A period of liberalization followed soon after.
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