INDEX

1. Abstract of recent trends of banking in

India
2. Introduction
3. Recent trend and development of banking
sector
4. Types of banking sector
5. Role of banking sector
6. 16 recent trends in banking sector
7. conclusion
8. references
RECENT TRENDS OF BANKING SECTOR IN INDIA
ABSTRACT:
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.

Key Words: Banking sector, recent trends and developments etc.

1.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.[1] 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.

2. 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. A 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.
TYPES OF BANKING SECTORS
In banking sector banks are classified into 7 types. In these each banks have their
own specialisation and can play different actions which are useful to everyday of
our life for monetary transactions. Those can be explained as follows.

RESERVE BANK OF INDIA (RBI)

The country had no central bank prior to the establishment of the RBI. The RBI is
the supreme monetary and banking authority in the country and controls the
banking system in India. It is called the Reserve Bank’ as it keeps the reserves of all
commercial banks.
1.SCHEDULED BANKS
A scheduled bank is a bank that is listed under the second schedule of the RBI
Act, 1934. In order to be included under this schedule of the RBI Act, banks have
to fulfil certain conditions such as having a paid-up capital and reserves of at least
0.5 million and satisfying the Reserve Bank that its affairs are not being conducted
in a manner prejudicial to the interests of its depositors. Scheduled banks are
further classified into commercial and cooperative banks.
2.non-scheduled banks
are those which are not included in the second schedule of the RBI Act, 1934. At
present these are only three such banks in the country.

COMMERCIAL BANKS
 Commercial banks may be defined as, any banking organization that deals with
the deposits and loans of business organizations. Commercial banks issue bank
checks and drafts, as well as accept money on term deposits. Commercial banks
also act as moneylenders, by way of instalment loans and overdrafts. Commercial
banks also allow for a variety of deposit accounts, such as checking, savings, and
time deposit. These institutions are run to make a profit and owned by a group of
individuals.

SCHEDULED COMMERCIAL BANKS (SCBS)

Scheduled commercial banks (SCBs) account for a major proportion of the
business of the scheduled banks. SCBs in India are categorized into the five
groups based on their ownership and/or their nature of operations. State Bank of
India and its six associates (excluding State Bank of Saurashtra, which has been
merged with the SBI with effect from August 13, 2008) are recognised as a
separate category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI
Subsidiary Banks Act, 1959) that govern them.

Types of Scheduled Commercial Banks

Public Sector Banks:

These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.
Private Sector Banks:
These are banks majority of share capital of the bank is held by private individuals.
These banks are registered as companies with limited liability. Examples of private
sector banks are: ICICI Bank, Axis bank, HDFC, etc.
Foreign Banks:
These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Examples of foreign banks in India are:
HSBC, Citibank, Standard Chartered Bank, etc Regional Rural Banks Regional Rural
Banks were established under the provisions of an Ordinance promulgated on the
26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient
institutional credit for agriculture and other rural sectors. The issued capital of a
RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.
COOPERATIVE BANKS:
A co-operative bank is a financial entity which belongs to its members, who are at
the same time the owners and the customers of their bank. Co-operative banks are
often created by persons belonging to the same local or professional community
or sharing a common interest. Co-operative banks generally provide their
members with a wide range of banking and financial services (loans, deposits,
banking accounts, etc).
❖ Cooperative banks are the primary financiers of agricultural activities,
some small-scale industries and self-employed workers.
❖ Co-operative banks function on the basis of “no-profit no-loss”.
The co-operative banking structure in India is divided into following main 5
categories:
❖ Primary urban co-operative banks
❖ Primary agriculture credit societies
❖ District central co-operative banks
❖ State co-operative banks
❖ Land development banks

ROLE OF BANKING SECTOR

Banks play a very important role in modern economic system. Now a day’s growth
of nation can be done through banking system.
The following are the some of roles played by banks.

• Banks motivate people to make savings.

• Banks mobilizes savings for the purpose of investment

• For the formation of capital banks play a coordination function between savings
and investment.

• For the enlargement of production purpose banks provide credit facilities.

• Banks provides financial infrastructure and funds for backward region which
made balanced regional development in the country.

• Banks plays a crucial role for expanding size of market.

• Through banks government fulfil every objective of planned economic

development.

The Following Are the Recent Trends in

Banking
1.UNIVERSAL BANKING: -

All the operations now can be performed in a single step. Electronic

conveniences are provided for a busy life. There are various services provided
by Electronic-Bank facilities:

1. Check account balance

2. Keep track of account transactions
3. Make third party payments
4. Transfer funds
5. Download transactions
6. Order chequebooks
7. Request stop payments

2.Point of sale (POS): -

POS is making a payment transaction in exchange for goods at that time. The
transaction can be done by using a debit or credit card. Every time PIN needs
to be entered to make a transaction.
Now, the bank will send that payment from the buyer account to the seller
account. These transactions are mostly used in malls where people do
shopping from their cards.
 POS MACHINE
3.Smart Wearable:

With smartwatch technology, the banking and financial services technology is

aiming to create a wearable for banking customers and provide more control
and easy access to the data.
Therefore, this technology is for future retail banking trends by providing
major banking services with just a click on a user-friendly interface on their
wearable device.

4.GLOBALIZATION OF BANKING: -

Globalization has come out as a prime mover in the Indian banking system.
The banking sector rises after the policy of liberalization in 1991 by opening
up banking and other sectors. Now, Foreign banks that want to set up or want
to open their offices/branches in India have been granted licenses by RBI. It
helps India to improve its technology.

5.Demat Account: - Demat Account is an electronic account to store shares,

securities. This eliminates the problems regarding payment, holding physical
securities certificates. Demat account is opened by several banks and brokers.
This trend in banking helps bank customers to buy shares online.
Every investor i.e., smaller or bigger investor can have registration through
stockbrokers like HDFC Securities, Kotak Securities, Upstox, etc.
6.SATELLITE BANKING: -

Satellite banking is a future technological innovation in the Indian banking

industry. Satellite banking is expected to help in solving the problems of weak
terrestrial places by connecting the communication links in many parts of the
country.

7.Artificial Intelligence Robots

Most private and nationalized banks in India have started to use chatbots or
Artificial intelligence robots for assistance in customer support services.
These technologies are made up of machine learning, chatbots, robotic
process automation, and intelligent analytics.

This technology removes the chances of human error and creates accurate
solutions for the customers. Also, it can recognize fraudulent behaviour,
feedback and assist in financial decisions.

8.Letters of credit: -

The letter of credit is a legal document from a bank that says the bank will pay
the exporter when the conditions in the letter are met. In effect, the bank is
liable to pay the amount to the seller. The issuing bank (buyer’s Bank) pays the
seller through the advising bank (seller’s bank). The buyer of goods pays the
issuing bank a fee for its services.

9.PHONE BANKING: -

The next trend in banking is now banks pick up the phone to access a host of
Bank services, day or night. Phone and mobile banking are a fairly recent up-
gradation for the Indian banking industry. Its channels function through an
Interactive Voice Response System (IVRS) or Telebanking executives of the
banks.

10. Blockchain Technology:

Blockchain is known for cryptocurrency or online currency like Bitcoin that

helps in keeping track of transactions in a secure and verifiable way. As
blockchain is highly secure and easy to operate, it can be used for promoting
transparency during payments & currency exchange in banking. It can also
help banks to save money and improve customer experience.

11. Quantum Computers

Quantum computers are machines that use the properties of quantum

physics to store data and perform calculations. This can be extremely
advantageous for making an accurate decision like making an optimal
investment portfolio, Current Balance.
12) UPI (Unified Payments Interface)

UPI has changed the way payments are made. It is a real-time payment system
that enables instant inter-bank transactions with the use of a mobile platform
developed by the National Payments Corporation of India. UPI makes funds
transfer available 24 hours, 365 days unlike other internet banking systems.
UPI is quicker, safe, and easy to use. Examples – Google pay, Paytm, Bhim UPI,
etc

13. Biometric verification system

Biometrics is Essential for security reasons; a Biometric verification system is

changing the national identity policies. Banking services are just one of the
many other industries that are experiencing new trends. With a duo or mixture
of encryption technology and OTPs, biometric authentication is projected to
create a highly secure database protecting it from leaks and hackers.

14. Hybrid Cloud Technology

The biggest question that the digital or modern age has brought to banking is
the need to communicate quickly. Banks need to be able to provide resources
across the enterprise in a timely manner to solve business problems faster .

Hybrid cloud also allows banks to offer new innovative offerings to their
customers. For example – ICICI Bank has partnered with Zoho Books which is
online accounting software. This allows Retail businesses or Shop owners to
automate the basic reconciliation process through Zoho Books. The
partnership was made with the need for online data entry and to offer multiple
payment options to the customers.

15. Data & Personalisation system

Technology advances have given banks the ability to analyse and categorize
more data about their customers. In 2021, more banks will start to use this data
effectively to provide customers with the personalized experiences that
customers have come to expect.
Data and personalization will become the new battleground for traditional
banks and challengers, with customers choosing their bank based on the level
of customization and support received through a bank’s digital channels.

16. E– Payment and settlement system: -

The payment & settlement system in India is mainly for financial transactions. In
India, multiple payment systems are used for gross and net settlement.

(i) RTGS
The full form of RTGS is the “Real Time Gross Settlement” system. It is a transfer
system in which the transfer of money takes place from one bank to any other
bank on a “real-time” and on a “gross basis”.
‘Real Time’ means the processing of payments at that time when the
instructions are received and ‘Gross Settlement’ means that the settlement of
funds transfer occurs on a one-to-one basis or line-wise.

(ii) Electronic Clearing System

ECS is an electronic mode of funds transfer from one bank account to another.
This is used for large transactions.
It is used by institutions or governments for making payments such as
distribution of dividend interest, salary, pension, among others.

(iii) Electronic data interchange (EDI) –

It facilitates computer-to-computer exchange of electronic documents (such as

purchase orders, advance shipment notices and without human intervention or
human-readable (paper or electronic documents).

Conclusion
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.
Reference:
1. https://acadpubl.eu/jsi/2017-116-13-22/articles/18/98.pdf
2. https://www.google.com/search?q=types+of+recent+trends+of+banking+in+india&r
lz=1C1UEAD_enIN976IN979&sxsrf=AOaemvLXgCYY2fXJjipRxDhR6KENU73xgQ:16386
3. http://data.conferenceworld.in/MCCIA/40.pdf
4. http://data.conferenceworld.in/MCCIA/40.pdf