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Banking in India has a long and elaborate history of more than 200 years. The beginning of this industry can be traced back to
1786, when the country’s first bank, Bank of Bengal, was
established. But the industry changed rapidly and drastically, after the nationalization of banks in 1969. As a result, the public sector banks began experiencing numerous positivechanges and enormous growth. Then came the much-talked-about liberalization andeconomic reforms that allowed banks to explore new business opportunities and not justremain constrained to generating revenues from mere borrowing and lending. This providedthe Indian banking scenario a remarkable facelift that only continues to get better with time.However, despite the foray of foreign banks in the country, nationalized banks continue to bebiggest lenders in the country. This is primarily due to the size of the banks and thepenetration of the networks.Features of the Banking Industry at a Glance
The banking industry is highly competitive.
There is tremendous growth potential in the banking sector, because firstly, the ruralmasses have the habit of saving and spending only when needed. Secondly, theirsmall credit requirements for agriculture, cottage industry and marriages etc.
The banking sector is in a race to see who can offer both the best and fastest services,but this also causes banks to experience a lower ROA.
In the long run, we're likely to see more consolidation in the banking industry. Largerbanks would prefer to take over or merge with another bank rather than spend themoney to market and advertise to people.
As the economy is picking up, the rise in capital expenditure will result in growth forcorporate sector lending.The public sector bank stocks look more promising thantheir private sector peers as they have lower valuations at the moment. Also, theywill benefit by the government's efforts to reduce the fiscal deficit.According to researches carried out by the Reserve Bank of India (RBI), on an allIndia basis, 59 per cent of the adult population in the country has bank accounts and
41 per cent don’t.
In rural areas, the coverage of banks is 39 per cent, against 60 percent in urban areas. There is only one bank for a population of 13000.