The growth and current trends of Indian banking system can be compared with the 'pav bhaji'. Two decades ago 'Pav bhaji' was the diet of the have-nots living at the Dharavi slum or in the Mumbai outskirts. There was nothing to prepare and deliver when this dish is concerned. The leftovers of the previous day was just smashed, spiced up a bit and devoured. This food of the have-nots has now left its modest abode, moved up the value chain and has also found a place of place in five-star menus. Take the case of Indian banking system and you will find the story of Pav bhaji in it.
In a country which was under the wealth drain for 200 years during colonialism, with devastated infrastructure, unorganised market, huge flux of people living below poverty line, low literacy rate, the path of development for banking system was never a rosy one. The banking system was predominated by local money lenders who offered loans at a sky scrapping rate. Saving was a matter of luxury in India as 67%(till 1971) of the total population were living below poverty line. Another factor that kept savings at its lowest ebb was the agricultural economy of India. Indian agriculture, the football in the monsoon's court was not enough to feed the growing population of India. As the per capita income was falling short of the per capita expenditure to a large extent there was an obvious question mark on savings.
At such a crucial stage the nationalisation of banks came as a crusader. The nationalisation made the Indian banking system more pro people and delivered the benefits of banking to the common man. However, post offices were the building blocks which helped a lot to organisse and streamline the Indian financial market and the total savings pool. Postal saving accounts were once meant only for the small investor. Hence, the name small saving accounts with ridiculously low minimum deposits like Rs. 10 were offered by post offices in the early seventies. But with declining interest rates in the Indian banking system, the humble small savings schemes generates a lot of excitement even with the upper crust.
Currently banking services in India is fairly matured in terms of supply, product range, application of information and technology. Even though reach of banking network in rural India still remains a challenge for the private sector and foreign banks, the development can definitely be called significant. In terms of quality of products, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in the Asian sub-continent. Take the example of saving accounts. This small form of saving has undergone through the phase of radical reformation due to the advent of foreign banks.
The advent of online banking has made the the transaction through saving accounts the easiest one. Now, Indian banks offer the saving accounts having world class benefits. Liquidity, 24 hours ATM facility, more penetration automatic teller machines, have made the dull segment(savings) of the economy a rapid growing one. Hoarding is now a matter of past as the ATMs can offer any time cash and the ATM facility is now available in the rural India also.
After liberalisation of the Indian economy, Foreign banking majors like Deutsche, Citibank and ABN Amro have entered the Indian market. They introduced online banking and other advanced features of banking and made the whole process more customer friendly. But they were somehow faulty in their approach by going for high end loans( loans for consumer appliances, comercial loan etc). This made their presence limited to the elite class of the urban India. However, they were the quick learners and started offering saving accounts which has remained the single largest economic activity in India since independence.
