by: Jay Kotak
Over the last decade, India has surged ahead as a veritable economic powerhouse. With GDP growth rates well above 8%, the nation is powering into global limelight, second only to China with respect to these astronomical growth figures. There have been many factors in India’s rapid ascent. The burgeoning financial sector has helped, to no small extent, with the economy’s expansion. However, the true spines of this financial sector are the nation’s banks. Rigid, yet flexible at the same time, India’s banking sector has grown and solidified immensely, allowing a stable money supply and surefire consumer confidence. It is an impressive achievement.
Part of this credit, must certainly go The Reserve Bank of India (RBI), the bank enforcer in India. Equivalent in many ways to the American Federal Reserve, the RBI is a vital organ in the Indian banking sector. Its numerous functions include:
1. Managing Foreign Exchange, creating and implementing Monetary policy (thus having complete Monetary Authority),
2. Issuing currency.
3. Acting as Regulator and supervisor of the financial system
4. Acting as a Lender of Last Resort. This is especially important because it prevents panic that can completely destabilize a national economy.
However, the integral organs of the banking sector are, naturally, the banks themselves. Both Private and Public Sector banks have a fair share of the market, with the private sector rising rapidly up charts. Banks such as ICICI Bank, HDFC Bank and Kotak Mahindra Bank have grown into huge institutions worth many billions of dollars. Offering world class services ranging from Personalized Banking, Online Banking, Phone Banking, Free national ATM Usage, Global Debit and Credit cards and much more, they really have set a standard. In fact, in this respect, Indian banks are almost at par with American banks. In some ways services in India even better, for example, I pay a fee to Citibank—which I have an account with—if I use a Chase ATM here in the United States, but I pay no surcharge to Kotak Mahindra Bank if I use an HDFC Bank ATM back in India. In this way, banking in the Indian Private Sector is in a very healthy, pro-service position. Also, the RBI has, till 2009, outlawed any takeovers by large foreign banks, giving the system a safety net. The private sector is, for now, safe.
The Public sector in India is dominated by one name. The State Bank of India, commonly known as SBI. The SBI is India’s largest bank and the epitome of the public sector. Offering similar services compared to the private sector, it is run by the government. As recent improvements in the private sector have occurred, the public sector has been forced to catch up. It certainly has done so. SBI customers all over India are satisfied for the most part. Its size is its greatest strength, and it ranks as a mega-bank even on the world scale. Furthermore, the public sector is littered with other healthy banks like the Bank of India and the Bank of Baroda.
All in all, Banks in India are one of its many upcoming RBI Watchdog facets. For the country to keep up the momentum, it remains critical that the government continues to take interest here. All seems well right now, and hopefully things will only get better.