is introduced. The entire system became more convenient and
swift. T ime is given more importance than money.
Nationalization of banks paved way for retail banking and as a
result there has been an all round growth in the branch network,
the deposit mobilization, credit disposals and of course
employment. The first year after nationalization witnessed the
total growth in the agricultural loans and the loans made to SSI
by 87% and 48% respectively. The overall growth in the deposits
and the advances indicates the improvement that has taken
place in the banking habits of the people in the rural and semiurban areas where the branch network has spread. Such credit
expansion enabled the banks to achieve the goals of
nationalization, it was however, achieved at the coast of
profitability of the banks.
The Spate of Reforms
The recommendations made by a high level committee on
financial sector, chaired by Mr M. Narasimham, laid the
foundation for the banking sector reforms during the post
liberalization era. These reforms tried to enhance the viability
and efficiency of the banking sector. The Narasimham Committee
suggested that there should be functional autonomy, flexibility
in operations, dilution of banking strangulations, reduction in
reserve requirements and adequate financial infrastructure in
terms of supervision, audit and technology. The committee
further advocated introduction of prudential forms, transparency
in operations and improvement in productivity, only aimed at
liberalizing the regulatory framework, but also to keep them in
time with international standards. The emphasis shifted to
efficient and prudential banking linked to better customer care
and customer services. It was in the early 1990s, the then
Narasimha Rao government embarked on a policy of liberalization,
licensing a small number of private banks. These came to be
known as New Generation tech-savvy banks, and included Global
Trust Bank which later amalgamated with Oriental Bank of
Commerce, Axis Bank, ICICI Bank and HDFC Bank. This move, along
with the rapid growth in the economy of India, revitalized the
banking sector in India, which has seen rapid growth with strong
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contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks. The next
stage for the Indian banking has been set up with the proposed
relaxation in the norms for Foreign Direct Investment, where all
Foreign Investors in banks may be given voting rights which could
exceed the present cap of 10%, at present it has gone up to 74%
with some restrictions. The new wave ushered in a modern
outlook and tech-savvy methods of working for traditional banks.
People started not just demanding more from their banks but
also received more. As of today, banking in India is generally fairly
mature in terms of supply, product range and reach, even though
reach in rural India still remains a challenge for the private sector
and foreign banks. In terms of quality of assets and capit