INDEX

Sr. Topics Page No.

No.

I Abstract 1

II Introduction 2

III Features of Banking Industry 7

IV History of banking in India 8

V Indian banking sector 13

VI Recent Trends in Indian Banking System 17

VII Conclusion 18

VIII Reference 19
 I. ABSTRACT
The Indian banking plays a big role in the development of the economy of India. It is the backbone of any
country’s economy, and its well-functioning is essential for nation building. Banking is an important aspect
of any country’s economy. And like any other industry, it has its standards, sets of documents, and
procedures. These ensure that banks carry out transactions with ease and efficiency.

The banking principles are based on the need to have a central figure that administers all the banking
activities of a country. My Present Paper related recent trends of banking sector in India. The reforms in the
Indian banking sector have been introduced to increase the efficiency, stability, and effectiveness of banks.
Current changing in banking related include data and analytics, enhanced security and fraud mitigation,
digital payments, cloud-based architectures and mobile apps in India

Recent Trends of public and private bank with financial inclusion Introduction the Indian banking industry
has recently witnessed the rollout of innovative banking models like payments and small finance banks. In
recent years India has also focused on increasing its banking sector reach, through various schemes like the
Pradhan Mantri Jan Dhan Yojana and Post payment banks.

Schemes like these coupled with major banking sector reforms like digital payments, neo-banking, a rise
of Indian NBFCs and fintech have significantly enhanced India’s financial inclusion and helped fuel the
credit cycle in the country.

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
out of which 47.5% are in rural and semi urban areas.

The banking system in India is significantly different from that of other Asian nations because of the
country’s unique geographic, social, and economic characteristics. India has a large population and land
size, a diverse culture, and extreme disparities in in- come, which are marked among its regions.

There are high levels of illiteracy among a large percentage of its population but, at the same time, the
country has a large reservoir of managerial and technologically ad- vaned talents. Between about 30 and 35
percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and
rural centres.

The country’s economic policy framework combines socialistic and capitalistic features with a heavy bias
towards public sector investment. India has followed the path of growth-led exports rather than the “export-
led growth” of other Asian economies, with emphasis on self-reliance through import substitution. banks

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already operating in the country as well as entry restrictions facing new foreign banks. A Crite- Rion of
reciprocity is required for any Indian bank to open an office abroad.

The banking sector plays a vital role in the development of one country’s economy. The growth of banking
sector depends upon the services provided by them to the customers in various aspects. The growing trend
of banking services is found significant after the new economic reforms in India. Today, India has a fairly
well-developed banking system with different classes of banks – public sector banks, foreign banks, private
sector banks – both old and new generation, regional rural banks and co-operative banks with the Reserve
Bank of India as the fountain Head of the system.

Nowadays banking sector acts as a backbone of Indian economy which reflects as a supporter during the
period of boom and recession. From 1991 various trends and developments in banking sector are credited.
It also reflects the various reforms were caused to improve their services to satisfy the customers.

II. INTRODUCTION
The banking system in India is significantly different from other Asian nations because of the country’s
unique geographic, social, and economic characteristics. India has a large population and land size, a diverse
culture, and extreme disparities in income, which are marked among its regions.

There are high levels of illiteracy among a large percentage of its population but, at the same time, the
country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35
percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and
rural centres.

The country’s economic policy framework combines socialistic and capitalistic features with a heavy bias
towards public sector investment. India has followed the path of growth led exports rather than the “export
led growth” of other Asian economies, with emphasis on self-reliance through import substitution. These
features are reflected in the structure, size, and diversity of the country’s banking and financial sector. The
banking system has had to serve the goals of economic policies enunciated in successive five-year
development plans, particularly concerning equitable income distribution, balanced regional economic
growth, and the reduction and elimination of private sector monopolies in trade and industry.

In order for the banking industry to serve as an instrument of state policy, it was subjected to various
nationalization schemes in different phases (1955, 1969, and 1980). As a result, banking remained
internationally isolated (few Indian banks had presence abroad in international financial centres) because
of preoccupations with domestic priorities, especially massive branch expansion and attracting more people
to the system.

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Moreover, the sector has been assigned the role of providing support to other economic sectors such as
agriculture, small-scale industries, exports, and banking activities in the developed commercial centres (i.e.,
metro, urban, and a limited number of semi-urban centres). The banking system’s international isolation
was also due to strict branch licensing controls on foreign banks already operating in the country as well as

entry restrictions facing new foreign banks. A criterion of reciprocity is required for any Indian bank to
open an office abroad. These features have left the Indian banking sector with weaknesses and strengths. A
big challenge facing Indian banks is how, under the current ownership structure, to attain operational
efficiency suitable for modern financial intermediation.

On the other hand, it has been relatively easy for the public sector banks to recapitalize, given the increases
in nonperforming assets (NPAs), as their government dominated ownership structure has reduced the
conflicts of interest that private banks would face.

Objectives of The Study

● To examine recent trends and developments in banking sector

● To present the technological developments in Indian banking sector

● To study the emerging trends in banking technology.

Recent Trends and Developments in Banking Sector

Today, we are having a fairly well-developed banking system with different classes of banks – public sector
banks, foreign banks, private sector banks, regional rural banks and co-operative banks. The Reserve Bank
of India (RBI) is at the paramount of all the banks. The RBI’s most important goal is to maintain monetary
stability (moderate and stable inflation) in India.

The RBI uses monetary policy to maintain price stability and an adequate flow of credit. The rates used by
RBI to achieve the bank rate, repo rate, reverse repo rate and the cash reserve ratio. Reducing inflation has
been one of the most important goals for some time. Growth and diversification in banking sector have
transcended limits all over the world. In 1991, the Government opened the doors for foreign banks to start
their operations in India and provide their wide range of facilities, thereby providing a strong competition
to the domestic banks, and helping the customers in availing the best of the services.

The Reserve Bank in its bid to move towards the best international banking practices will further sharpen
the prudential norms and strengthen its supervisor mechanism. There has been considerable innovation and
diversification in the business of major commercial banks. Some of them have engaged in the areas of
consumer credit, credit cards, merchant banking, internet and phone banking, leasing, mutual funds etc.

few banks have already set up subsidiaries for merchant banking, leasing and mutual funds and many more
are in the process of doing so. Some banks have commenced factoring business
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Development In Banking Sector

Internet

Internet is a networking of computers. In this marketing message can be transferred and received
worldwide. The data can be sent and received in any part of the world. In no time, internet facility can do
many a job for us. It includes the following:

 This net can work as electronic mailing system. It can have access to the distant database, which
may be a newspaper of foreign country. Customers can exchange their ideas through Internet and
can make contact with anyone who is a linked with internet. On internet, one can exchange letters,
figures/diagrams and music recording Internet is a fast-developing net and is of utmost important
for public sector undertaking, Education Institutions, Research Organization etc.
 Society For Worldwide Inter-Bank Financial Telecommunications (Swift) SWIFT, as a co-operative
society was formed in May 1973 with 239 participating banks from 15 countries with its
headquarters at Brussels. It started functioning in May 1977. RBI and 27 other public sector banks
as well as 8 foreign banks in India have obtained the membership of the SWIFT. SWIFT provides
have rapid, secure, reliable and cost-effective mode of transmitting the financial messages
worldwide.
 At present more than 3000 banks are the members of the network. To cater to the growth in
messages, SWIFT was upgrade in the 80s and this version is called SWIFT-II. Banks in India are
hooked to SWIFT-II system. SWIFT is a method of the sophisticated message transmission of
international repute.
 This is highly cost effective, reliable and safe means of fund transfer. This network also facilitates
the transfer of messages relating to fixed deposit, interest payment, debit-credit statements, foreign
exchange etc. This service is available throughout the year, 24 hours a day. This system ensures
against any loss of mutilation against transmission.
 It is clear from the above benefit of SWIFT that it is very beneficial in effective customer service.
SWIFT has extended its range to users like brokers, trust and other agents.

Automated Teller Machine (ATM)

 ATM is an electronic machine, which is operated by the customer himself to make deposits,
withdrawals and other financial transactions.
 ATM is a step in improvement in customer service. ATM facility is available to the customer 24
hours a day. The customer is issued an ATM card.
 his is a plastic card, which bears the customer’s name. This card is magnetically coded and can be
read by this machine. Each cardholder is provided with a secret personal identification number

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 (PIN). When the customer wants to use the card, he has to insert his plastic card in the slot of the
machine.
 After the card is a recognized by the machine, the customer enters his personal identification
number.
 After establishing the authentication of the customers, the ATM follows the customer to enter the
amount to be withdrawn by him. After processing that transaction and finding sufficient balances in
his account, the output slot of ATM gives the required cash to him.
 When the transaction is completed, the ATM ejects the customer’s card.

Cash Dispensers

 Cash withdrawal is the basic service rendered by the bank branches. The cash payment is made by
the cashier or teller of the cash dispenses is an alternate to time saving.
 The operations by this machine are cheaper than manual operations and this machine is cheaper and
fast than that of ATM.
 The customer is provided with a plastic card, which is magnetically coated. After completing the
formalities, the machine allows the machine the transactions for required amount.

Electronic Clearing Service

 In 1994, RBI appointed a committee to review the mechanization in the banks and also to review
the electronic clearing service. The committee recommended in its report that electronic clearing
service-credit clearing facility should be made available to all corporate bodies/Government
institutions for making repetitive low value payment like dividend
 interest, refund, salary, pension or commission, it was also recommended by the committee
Electronic Clearing Service-Debit clearing may be introduced for pre-authorized debits for
payments of utility bills, insurance premium and instalments to leasing and financing companies.
RBI has been necessary step to introduce these schemes, initially in Chennai, Mumbai, Calcutta and
New Delhi.

Bank Net

 Bank net is a first national level network in India, which was commissioned in February 1991.
It is communication network established by RBI on the basis of recommendation of the
committee appointed by it under the chairmanship of the executive director T.N.A. Lyre. Bank
net has two phases: Bank net-I and Bank net. Chipcard The customer of the bank is provided
with a special type of credit card which bears customer’s name, code etc.
 The credit amount of the customer account is written on the card with magnetic methods. The
computer can read these magnetic spots. When the customer uses this card, the credit amount
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 written on the card starts decreasing. After use of number of times, at one stage, the balance
becomes nil on the card. At that juncture, the card is of no use.
 The customer has to deposit cash in his count for re-use of the card. Again, the credit amount is
written on the card by magnetic means.

Phone Banking

 Customers can now dial up the bank’s designed telephone number and he by dialling his ID
number will be able to get connectivity to bank’s designated computer. The software provided
in the machine interactive with the computer asking him to dial the code number of service
required by him and suitably answers him. By using Automatic voice recorder (AVR) for simple
queries and transactions and manned phone terminals for complicated queries and transactions,
the customer can actually do entire non-cash relating banking on telephone: Anywhere,
anytime.

Tele-banking

 Tele banking is another innovation, which provided the facility of 24-hour banking to the
customer. [20] Telebanking is based on the voice processing facility available on bank
computers. The caller usually a customer calls the bank anytime and can enquire balance in his
account or other transaction history.
 In this system, the computers at bank are connected to a telephone link with the help of a
modem. Voice processing facility provided in the software. This software identifies the voice
of caller and provides him suitable reply.
 Some banks also use telephonic answering machine, but this is limited to some brief functions.
This is only telephone answering system and now Tele-banking. Tele banking is becoming
popular since queries at ATM’s are now becoming too long.

Internet Banking

 Internet banking enables a customer to do banking transactions through the bank’s website
on the Internet.
 It is a system of accessing accounts and general information on bank products and services
through a computer while sitting in its office or home.
 This is also called virtual banking. It is more or less bringing the bank to your computer. In
traditional banking one has to approach the branch in person; to withdraw cash or deposit a
cheque or request a statement of accounts etc. but internet banking has changed the way of
banking.

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  Now everyone can operate all these type of transactions on his computer through website
of bank. All such transactions are encrypted using sophisticated multi-layered security
architecture, including firewalls and filters. One can be rest assured that one’s transactions
are secure and confidential.
Mobile Banking
Mobile banking facility is an extension of internet banking. The bank is in association with the
cellular service providers offers this service. For this service, mobile phone should either be SMS

or WAP enabled. These facilities are available even to those customers with only credit card
accounts with the bank.

III. FEATURES OF BANKING INDUSTRY

These features have left the Indian banking sec- tor with weaknesses and strengths. A big challenge
facing Indian banks is how, under the current ownership structure, to attain operational efficiency
suit- able for modern financial intermediation. On the other hand, it has been relatively easy for the
public sector banks to recapitalize, given the increases in nonperforming assets (NPAs), as their
government- dominated ownership structure has reduced the con- flits of interest that private banks
would face. Public sector banks are the backbone of the Indian economy, and now more than ever,
private players are entering the fray. This is good news for customers, who will be offered a
widening menu of savings and loan products and innovative services like online banking: an
introduction to easy transaction methods. However, it is also good news for banks, as they will be
forced to improve their services and compete more aggressively to retain customers. The banking
sector in India has been undergoing transformation, driven by public sector banks (PSBs). Banking
is the process of storing money for future use, either in cash or by investing it. Banks are where
people get money from when they need it to make payments or buy goods and services. Businesses
can also borrow money to grow or expand. Banks must have a wide network of branches across the
country and overseas to perform these functions effectively

They must also be able to keep their records safe in computerized databases that cannot be easily
hacked. Banks handle money and valuable items such as gold, silver, diamonds, and other precious
items. They accept deposits and make loans and payments to their customers.

They also provide credit cards, debit cards, check books, etc. Banking institutions are divided into
three categories: Commercial Banks also referred to as deposit banks - Mutual Funds, Central/State
Governments Various Aspect of Banking
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 IV. HISTORY OF BANKING IN INDIA

The banking sector development can be divided into three phases:

Phase I: The Early Phase which lasted from 1770 to 1969

Phase II: The Nationalisation Phase which lasted from 1969 to 1991

Phase III: The Liberalisation or the Banking Sector Reforms Phase which began in 1991 and continues to

flourish till date

History of Banking in India

Given below is a pictorial representation of the evolution of the Indian banking system over the years:

Pre Independence-Period (1786-1947)

The first bank of India was the “Bank of Hindustan”, established in 1770 and located in the then Indian
capital, Calcutta. However, this bank failed to work and ceased operations in 1832.

During the Pre Independence period over 600 banks had been registered in the country, but only a few
managed to survive.

Following the path of Bank of Hindustan, various other banks were established in India. They were:

 The General Bank of India (1786-1791)

 Oudh Commercial Bank (1881-1958)

 Bank of Bengal (1809)

 Bank of Bombay (1840)

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  Bank of Madras (1843)

During the British rule in India, The East India Company had established three banks: Bank of Bengal,
Bank of Bombay and Bank of Madras and called them the Presidential Banks. These three banks were later
merged into one single bank in 1921, which was called the “Imperial Bank of India.”

The Imperial Bank of India was later nationalised in 1955 and was named The State Bank of India, which
is currently the largest public sector Bank.

Given below is a list of other banks which were established during the Pre-Independence period:

Pre Independence-Banks in India

Bank Name Year of Establishment

Allahabad Bank 1865

Punjab National Bank 1894

Bank of India 1906

Central Bank of India 1911

Canara Bank 1906

Bank of Baroda 1908

If we talk of the reasons as to why many major banks failed to survive during the pre-independence period,
the following conclusions can be drawn:

 Indian account holders had become fraud-prone

 Lack of machines and technology

 Human errors & time-consuming

 Fewer facilities

 Lack of proper management skills

Following the Pre-Independence period was the post-independence period, which observed some
significant changes in the banking industry scenario and has till date developed a lot.

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Post Independence Period (1947-1991)

At the time when India got independence, all the major banks of the country were led privately which was
a cause of concern as the people belonging to rural areas were still dependent on money lenders for financial
assistance.

With an aim to solve this problem, the then Government decided to nationalise the Banks. These banks
were nationalised under the Banking Regulation Act, 1949. Whereas the Reserve Bank of India was
nationalised in 1949.

Following it was the formation of State Bank of India in 1955 and the other 14 banks were nationalised
between the time duration of 1969 to 1991. These were the banks whose national deposits were more than
50 crores.

Given below is the list of these 14 Banks nationalised in 1969:

1. Allahabad Bank

2. Bank of India

3. Bank of Baroda

4. Bank of Maharashtra

5. Central Bank of India

6. Canara Bank

7. Dena Bank

8. Indian Overseas Bank

9. Indian Bank

10. Punjab National Bank

11. Syndicate Bank

12. Union Bank of India

13. United Bank

14. UCO Bank

In the year 1980, another 6 banks were nationalised, taking the number to 20 banks. These banks included:

1. Andhra Bank

2. Corporation Bank

3. New Bank of India

4. Oriental Bank of Comm.

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 5. Punjab & Sind Bank

6. Vijaya Bank

Apart from the above mentioned 20 banks, there were seven subsidiaries of SBI which were nationalised
in 1959:

1. State Bank of Patiala

2. State Bank of Hyderabad

3. State Bank of Bikaner & Jaipur

4. State Bank of Mysore

5. State Bank of Travancore

6. State Bank of Saurashtra

7. State Bank of Indore

All these banks were later merged with the State Bank of India in 2017, except for the State Bank of
Saurashtra, which merged in 2008 and State Bank of Indore, which merged in 2010.

Note: The Regional Rural Banks in India were established in the year 1975 for the development of rural
areas in India.

Impact of Nationalisation

There were various reasons why the Government chose to nationalise the banks. Given below is the impact
of Nationalising Banks in India:

 This led to an increase in funds and thereby increasing the economic condition of the country

 Increased efficiency

 Helped in boosting the rural and agricultural sector of the country

 It opened up a major employment opportunity for the people

 The Government used profit gained by Banks for the betterment of the people

 The competition decreased, which resulted in increased work efficiency

This post Independence phase was the one that led to major developments in the banking sector of India
and also in the evolution of the banking sector.

Liberalisation Period (1991-Till Date)

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Once the banks were established in the country, regular monitoring and regulations need to be followed to
continue the profits provided by the banking sector. The last phase or the ongoing phase of the banking
sector development plays a hugely significant role.

To provide stability and profitability to the Nationalised Public sector Banks, the Government decided to
set up a committee under the leadership of Shri. M Narasimha to manage the various reforms in the Indian
banking industry.

The biggest development was the introduction of Private sector banks in India. RBI gave license to 10
Private sector banks to establish themselves in the country. These banks included:

1. Global Trust Bank

2. ICICI Bank

3. HDFC Bank

4. Axis Bank

5. Bank of Punjab

6. IndusInd Bank

7. Centurion Bank

8. IDBI Bank

9. Times Bank

10. Development Credit Bank

The other measures taken include:

 Setting up of branches of the various Foreign Banks in India

 No more nationalisation of Banks could be done

 The committee announced that RBI and Government would treat both public and private sector
banks equally

 Any Foreign Bank could start joint ventures with Indian Banks

 Payments banks were introduced with the development in the field of banking and technology

 Small Finance Banks were allowed to set their branches across India

 A major part of Indian banking moved online with internet banking and apps available for fund
transfer

Thus, the history of banking in India shows that with time and the needs of people, major developments
have been brought about in the banking sector with an aim to prosper it.

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 V. THE INDIAN BANKING SECTOR
The Indian banking sector has been experiencing a wave of change over the past decade. The growth in
mobile banking and biometrics have, to an extent, affected the traditional business models of banks.
However, most banks have shown tremendous resilience to these changes through adaptability and
innovation. The banking sector has become most relevant for everyone. Through online banking, we can
do our transactions from anywhere and at any time. The Internet has made sending money and transferring
funds from one account to another at no cost. The government’s extensive recapitalisation exercise of public
banks over the years has also helped these lenders become more self-sufficient. As public banks still
dominate the Indian banking landscape, the good health of these banks is of utmost importance for credit
and GDP growth. Banking sector’

Banking Sector’s Outlook

The banking sector’s outlook has improved, with asset quality and growth metrics possibly looking at their
best over the last decade. The Reserve Bank of India (RBI), in its Financial Stability Report for June,
showed India’s gross net performing assets' ratio falling to a six-year low of 5.9% in March, highlighting
the banking system’s rising ability to support economic growth.

The bank then lends the money it has on deposit to other individuals and businesses and receives interest
payments from the borrower in return. Banks make a profit on the difference between the interest rate that
they pay depositors for the use of their money and the higher interest rate that

they charge borrowers. By law, banks cannot lend out all of the money in their possession but are required
by regulators to keep a certain amount of capital in reserve to cover withdrawals and other needs. The rules
change from time to time and vary by the size of the bank, but many large U.S. banks recently were required
to keep 8% of their capital in reserve.

Credit System in Rural Areas

Credit is an important instrument for rural development. Most of the agricultural chores still depend on
manual labour. It also involves techniques which are outdated and result in low outputs. The investment in
rural areas has been on a low which effectively results in low output and productivity in all kinds of
activities.

Capital Infusion

A capital infusion for a jump in productivity in reference to both agricultural and non-agricultural activities
can be achieved by reforming credit and banking system. During the gestation period between sowing and
harvesting seasons, farmers need credit to make ends meet, their general needs, initial requirements etc.
Additionally, they also need credit to venture into modern agricultural techniques, to buy cattle, land etc.
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Rural Banks

The banking and credit system in rural India has come a long way. With credit available at low interest rates
through operation of NABARD and microcredit generation by the various self-help groups, less poor are
falling into the debt trap. After the advent of the green revolution, productivity in agriculture increased
manifolds. In essence modern techniques, high yielding variety seeds, sustainable activities etc. have been
promoting productivity and output.

World’s Largest Democracy

India is the world’s largest democracy,” reports (link resides outside ibm.com) the World Bank. “Over the
past decade, the country’s integration into the global economy has been accompanied by economic growth.
India has now emerged as a global player.” For more than 200 years, State Bank of India (SBI) has been
the country’s largest public sector bank, and its financial foundation. As many of the bank’s customers grew
their wealth in recent years, the bank saw that people had new financial freedom and sought new
opportunities. It also knew that this growth could empower India’s future as a global financial force.

Banking And Growth

Theoretically, financial intermediaries help in mobilization of savings, project evaluation, risk

diversification, monitoring management of firms in debt, facilitating transactions through technological
innovation, and creating an environment for higher economic growth. Bank credit acts as money-capital
and thus, is necessary for realization of innovative processes planned by entrepreneurs. The commercial
banks and financial intermediaries loan out money to producers in order to help them invest in capital goods
and sustain a steady rate of growth. Banks also are not passive intermediaries and help in transferring
resources to new entrepreneurs. Banks also interact with intermediaries to decide the volume of credit based
on their profit expectations of the project and the entrepreneur’s ability to pay back the loans. Thus, banks
play a crucial role in economic activity, innovation and entrepreneurship. The banking institutions play an
important role in credit markets and serve as a centre of social accounts. This function of a “social
accountant”, stressing the role of banking as a social institution needed for the constrained realization of
individual choices and to make those choices mutually compatible, has a critical impact on the economy.
The commercial banks are also repositories of unique information about their borrowers, an important
segment of the credit market.

Financial Inclusion

Financial inclusion may be defined as the process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at an
affordable cost (The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan). Financial Inclusion,
broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These
14
include not only banking products but also other financial services such as insurance and equity products
(The Committee on Financial Sector Reforms, Chairman: Raghuram G. Rajan).

Public And Private Sector Banks

Public and private sector banks had been advised to submit board approved three-year Financial Inclusion
Plan (FIP) starting from April 2010. These policies aim at keeping self-set targets in respect of rural brick
and mortar branches opened, BCs employed, coverage of unbanked villages with population above 2000
and as well as below 2000, BSBD accounts opened, KCCs, GCCs issued and others. RBI has been
monitoring these plans on a monthly basis. Banks have been advised that their FIPs should be disaggregated
and percolated down up to the branch level. This would ensure the involvement of all stakeholders in the
financial inclusion efforts. Development banks can be known as special industrial financial institutions.
These banks were mostly established after World War II in both developed as well as developing countries
in the world. Just like elsewhere, the development banks in India are responsible for accelerating the
economic development of the country. In the following banking awareness study notes on development
banks, we shall learn more about them in terms of meaning, types, features, and more!

Unlike other commercial banks, the development banks do not mobilize savings. Instead, they invest the
resources in a productive and efficient manner. These banks are expert financial bodies that perform the
dual functions of granting medium and long-term finances to private entrepreneurs and performing
promotional roles for the economic development of the country.

Bank Resilience And Risk-Taking

Bank resilience and risk-taking. Banks globally have enhanced their resilience to future risks by
substantially building up capital and liquidity buffers. The increased use of stress testing by banks and
supervisors since the crisis also provides for greater resilience on a forward-looking basis, which should
help support credit flows in good and bad times. In addition, advanced economy banks have shifted to more
stable funding sources and invested in safer and less complex assets. Some of these adjustments may be
driven partly by cyclical factors, such as accommodative monetary policy, and hence may diminish as
conditions change. Qualitative evidence indicates that banks have considerably strengthened their risk
management and internal control practices. Although these changes are hard to assess, supervisors point to
significant scope for further improvements, in particular because of the inherent uncertainties about the
future evolution of risks. According to S&P GlobalX’s forecasts in November 2022, India's real GDP could
grow by an average of 6.3% annually from FY2021 to FY2030, allowing the country to be the third largest
in the world by the end of the decade. Currently, the country is the fifth largest in terms of nominal GDP.
The Ministry of External Affairs, Government of India writes in 2021, "India’s 1.3 billion people make it
the second most populous country in the world, but with an average age of 29, it has one of the youngest
populations globally. As this vast resource of young citizens enters the workforce, it could create a
15
‘demographic dividend’. A demographic dividend is defined by the United Nations Population Fund as
economic growth resulting from a shift in a population’s age structure, mainly when the working-age
population is larger than the number of dependents.

Capital Requirement

As the capital requirement served as a barrier to entry, our data also allows us to study whether differences
in bank behaviour are a response to actual entry or driven by the threat of potential entry. In particular, when
studying the dynamics of the differences in credit provision across markets with different entry barriers, we
find that credit provision decreases right after the publication in markets with higher barriers to entry. Given
that actual additional entry only occurs after time has passed, we interpret this as an indication that
incumbent banks attempt to deter banks from entering by increasing credit provision in their local market.
Likewise, theory has ambiguous predictions with respect to risk taking. Competition potentially

increases bank risk taking as it may decrease the charter value of banks and hence destroy the incentives of
bankers to behave prudently. (see, e.g., Keeley, 1990; Allen and Gale, 2004).4Yet other theories predict that
competition decreases the overall riskiness of bank lending as it induces lower interest rates, which in turn
mitigates moral hazard concerns of bank borrowers.

Non-Banking Financial Companies

Non-banking financial companies (NBFC) are companies registered under the Companies Act, 1956. They
are responsible for providing financial services but are not regulated by a national or international governing
body and do not hold a full-fledged license for conducting operations. The financial services offered by
NBFCs include disbursement of loans and advances, acquisition of stocks, shares or bonds etc. They do not
accept demand drafts and are not a part of payment/settlement system unlike banks. NBFCs are more
commonly known in the forms of microloan organisations, insurance companies, investment houses and
more. According to Alan Greenspan, non-banking financial institutions contribute to empowering the
economy as they deliver “multiple alternatives to transform an economy’s savings into capital investment
[which] act as backup facilities should the primary form of intermediation fail

Public Sector Banks

Public sector banks are the backbone of the Indian economy, and now more than ever, private players are
entering the fray. This is good news for customers, who will be offered a widening menu of savings and
loan products and innovative services like online banking: an introduction to easy transaction methods.
However, it is also good news for banks, as they will be forced to improve their services and compete more
aggressively to retain customers. The banking sector in India has been undergoing transformation, driven
by public sector banks (PSBs).

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 VI. RECENT TRENDS OF BANKING SYSTEM IN INDIA

IT in Banking

Indian banking industry today is in the midst of an IT revolution. A combination of regulatory and
competitive reasons has led to increasing importance of total banking automation in the Indian Banking
Industry. The bank which used the right technology supply timely information will see productivity
increase and thereby gain a competitive edge. To compete in an economy which is opening up, it is
imperative for the Indian Banks to observe the latest technology and modify it to suit their environment.
Information technology offers a chance for banks to build new systems that address wide range of customer
needs including many that may not be imaginable today. Following are the innovative services offered by
the industry in the recent past

Electronic Payment Services - E Cheques

Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc. In the same manner, a new
technology is being developed in US for introduction of-cheque, which will eventually replace the
conventional paper cheque. India, as harbinger to the introduction of e-cheque, the Negotiable Instruments
Act has already been amended to include Truncated cheque and E-cheque instruments.

Real Time Gross Settlement (RTGS)

Real Time Gross Settlement system, introduced in India since March 2004, is a system through which
electronics instructions can be given by banks to transfer funds from their account to the account of another
bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster
funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer
between banks takes place on a 'Real Time' basis. Therefore, money can reach the beneficiary
instantaneously and the beneficiary's bank has the responsibility to credit the beneficiary’s account within
two hours.

Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment to another
person/company etc. can approach his bank and make cash payment or give instructions/authorization to
transfer funds directly from his own account the bank account of the receiver/beneficiary. Complete details
such as the receiver’s name, bank account number, account type (savings or current account), bank name,
city, branch name etc. should be furnished to the bank at the time of requesting for such transfers so that
the amount reaches the beneficiaries' account correctly and faster. Riis the service provider of EFT.

Electronic Clearing Service (ECS)

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Electronic Clearing Service is a retail payment system that can be used to make bulk payments/receipts of
a similar nature especially where each individual payment is of repetitive nature and of relatively smaller
amount. This facility is meant for companies and government departments to make/receive large volumes
of payments rather than for funds transfers by individuals.

Automatic Teller Machine (ATM)

Automatic Teller Machine is the most popular devise in India, which enables the customers to withdraw
their money 24 hours a day 7 days a week. It is a device that allows customer who has an ATM card to
perform routine banking transactions without interacting with a human teller. In addition to cash
withdrawal,

ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of cheques and
cash into accounts, balance enquiry etc.

Tele Banking

Tele Banking facilitates the customer to do entire non-cash related banking telephone. Under this devise
Automatic Voice Recorder is used for simpler queries and transactions. For complicated queries and
transactions, manned phone terminals are used.

Electronic Data Interchange (EDI)

Electronic Data Interchange is the electronic exchange of business documents like purchase order, invoices,
shipping notices, receiving advice etc. in a standard, computer processed, universally accepted format
between trading partners. EDI can also be used to transmit financial information and payments in electronic
form.

Implications The banks were quickly responded to the changes in the industry, especially the new
generation banks. The continuance of the trend has re-defined and re-engineered the banking operations as
whole with more customization through leveraging technology. As technology makes banking convenient,
customers can access banking services and banking transactions any time and from any ware. The
importance of physical branches is going Dow

VII. CONCLUSION
The banking sector in India is progressing with the increased growth in customer base, due to the newly
improved and innovative facilities offered by banks. The economic growth of the country is an indicator
for the growth of the banking sector. The big challenge facing Indian banks is how, under the current
ownership structure, to attain operational efficiency suitable for modern financial intermediation. On the
other hand, it has been relatively easy for the public sector banks to recapitalize, given the increases in
nonperforming assets (NPAs), as their Government dominated ownership structure has reduced the conflicts
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of interest that private banks would face.in modern Esa Large banks will focus on offering value added
services to their commercial customers and creating new revenue streams through better integration with
ERP systems, embedding finance, payments and information services.

In the days to come, banks are expected to play a very useful role in the economic development and the
emerging market will provide business opportunities to harness. As banking in India will become more and
more knowledge supported, capital will emerge as the finest assets of the banking system. Ultimately
banking is people and not just figures. To conclude it all, the banking sector in India is progressing with the
increased growth in customer base, due to the newly improved and innovative facilities offered by banks.

The economic growth of the country is an indicator for the growth of the banking sector. The Indian
economy is projected to grow at a rate of 5-6 per cent34 and the country’s banking industry is expected to
reflect this growth. The onus for this lies in the capabilities of the Reserve Bank of India as an able central
regulatory authority, whose policies have shielded Indian banks from excessive leveraging and making high
risk investments. By the government support and a careful re-evaluation of existing business strategies can
set the stage for Indian banks to become bigger and stronger, thereby setting the stage for expansions into
a global consumer base.

VIII. REFERENCES
https://acadpubl.eu/jsi/2017-116-13-22/articles/18/98.pdf

https://www.scribd.com/document/310577903/Recent-Trends-in-Banking

https://ijcrt.org/papers/IJCRT2303557.pdf

http://ijar.org.in/stuff/issues/v7-i2(2)/v7-i2(2)-a031.pdf

https://www.ijfmr.com/special-issues/2/35.pdf

https://www.jetir.org/papers/JETIR2012274.pdf

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