Banking industry in India - Statistics & Facts

Banking in India is considered a fairly mature and stable sector in terms of credit, market and liquidity risk. Indian banks are considered to be dependent, relative to other banks in comparable economies in the region while also being generally resilient to global economic downturns.

The Reserve Bank of India has been the country’s central banking institution and controls the issuance and supply of the Indian rupee. The RBI Act of 1934 broadly classified the Indian banking sector into scheduled banks and non-scheduled banks. Scheduled banks are those that have a paid-up capital and collected funds of over five lakh rupees and are eligible for loans from the RBI at bank rate. All other banks fall under the non-scheduled category. After independence from the British in 1947, the Government of India took major steps to reform the banking sector. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the country’s economy. In 1969, fourteen of India’s commercial banks were nationalized in order to cater to the country’s growing financial needs. The second masterstroke in India’s economy came about in 1991 when the government embarked on a liberalization policy and licensed several private banks to fall under the scheduled banks list. Banking practices also got a big facelift which came to be known as the New Generation tech-savvy banking. This move, along with the rapid growth in India’s economy, revitalized the banking sector in the country.

As of 2019, there were 27 public sector banks, with assets over 1.6 trillion U.S. dollars. The deposits increased at a CAGR of around 12 percent, and the total lending had increased at a CAGR of around 11 percent. The foreign exchange reserves with the RBI were over 400 billion U.S. dollars as of financial year 2018.

In the last decade, India set out on a technocentric path in order to make banking more accessible, easy and efficient. Adoption of debit and credit cards along with digital payments systems like Paytm and RuPay has been growing steadily in not only the urban areas but also the rural areas. In August 2018, there were 805.52 million ATM transactions and 357.17 million point-of sale transactions made via debit card in India. Mobile banking has also seen a spur since demonetization of currency in 2016 with more than 60 percent of youth between 18 to 26 years of age preferring the use of smartphones for banking activities as pointed out in a survey.

As part of the Modi government’s financial inclusion program, the Pradhan Mantri Jan Dhan Yojana was launched in August 2014. This scheme aimed to make financial services like bank accounts, remittances, credit and insurance, accessible and affordable to the millions of Indians who have historically been left out of the financial system. As of February 2019, there were over 278 million recipients of this scheme, and more than 743 billion Indian rupees deposited in public sector banks through the scheme.

Despite this consistent growth story in India’s banking sector, there is still room for improvement and caution. Banking services have not yet fully spread out in the country- especially in rural areas. Furthermore, bank frauds and cyber-crimes have been a problem in the country over the last few years. Fiscal year 2019 saw the highest amount of losses due to bank frauds, involving over 715 billion Indian rupees. Whereas, there were over 16 thousand cybercrime cases related to banking systems across the country in 2016. This shows that although the Indian banking sector is poised for robust growth, it also needs to tighten its grip on security measures and awareness regarding bank frauds and digital security.

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Banking industry in India

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