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Banking Sector in India

According to rbi’s scheduled banks’ statement, deposits of all scheduled banks collectively surged by a whopping rs 2.04 lakh crore (us$ 2,452.00 billion) as on fy24., advantage india, robust demand.

* Indian Fintech industry is estimated to be at US$ 150 billion by 2025. India has the 3rd largest FinTech ecosystem globally.​

* BCG predicts that the proportion of digital payments will grow to 65% by 2026.​

* That demand seems particularly strong when it comes to the critical need of protecting consumer data, where incumbent banks have a trust advantage. Some super apps may also turn to banks for access to banking licenses and to meet other regulatory requirements.​

Innovation in Services

* In the recent period, technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion and competitiveness in the extension of financial services, especially in the area of digital lending. ​

* Digitalization of Agri-finance was conceptualized jointly by the Reserve Bank and the Reserve Bank Innovation Hub (RBIH). This will enable delivery of Kisan Credit Card (KCC) loans in a fully digital and hassle-free manner. ​

* In Union Budget 2023, the KYC process will be streamlined by using a 'risk-based' strategy rather than a 'one size fits all' approach. ​

* In September 2023, Hitachi Payment Services launched India's first-ever UPI-ATM with NPCI.​

Business Fundamentals

* The Indian banking industry has been on an upward trajectory aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit.

* Digital modes of payments have grown by leaps and bounds over the last few years.

* As on April 2024, there were 581 banks actively using UPI. The total number of digital transactions during this period amounted to 15.08 billion, with a total value of US$ 25.27 billion (Rs. 2.1 trillion).​

Policy Support

* The RBI has launched a pilot to digitalize KCC lending in a bid for efficiency, higher cost savings, and reduction of TAT. This is expected to transform the flow of credit in the rural economy. ​

* In November 2022, RBI launched a pilot project on central bank digital currency (CBDC).​

* In Union Budget 2023, a national financial information registry would be constructed to serve as the central repository for financial and ancillary data.​

* In March 2023, India Post Payments Bank (IPPB), in collaboration with Airtel, announced the launch of WhatsApp Banking Services for IPPB customers in Delhi.​

Banking Industry Report

Introduction.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in the country are far superior to any other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well.

The Indian banking industry has recently witnessed the rollout of innovative banking models like payments and small finance banks. In recent years India has also focused on increasing its banking sector reach, through various schemes like the Pradhan Mantri Jan Dhan Yojana and Post payment banks. Schemes like these coupled with major banking sector reforms like digital payments, neo-banking, a rise of Indian NBFCs and fintech have significantly enhanced India’s financial inclusion and helped fuel the credit cycle in the country.

Indian Fintech industry is estimated to be at US$ 150 billion by 2025. India has the 3rd largest FinTech ecosystem globally. India is one of the fastest-growing Fintech markets in the world.

There are currently more than 2,000 DPIIT-recognized Financial Technology (FinTech) businesses in India, and this number is rapidly increasing. The digital payments system in India has evolved the most among 25 countries with India’s Immediate Payment Service (IMPS) being the only system at level five in the Faster Payments Innovation Index (FPII). India’s Unified Payments Interface (UPI) has also revolutionized real-time payments and strived to increase its global reach in recent years.

Market Size

The Indian banking system consists of 12 public sector banks, 21 private sector banks, 44 foreign banks, 12 Small finance banks. As of April 2024, the total number of micro-ATMs in India reached 17,36,972. Moreover, there are 1,26,593 on-site ATMs and Cash Recycling Machines (CRMs) and 91,826 off-site ATMs and CRMs.

Banks added 2,796 ATMs in the first four months of FY23, against 1,486 in FY22 and 2,815 in FY21. 100% of new bank account openings in rural India are being done digitally. BCG predicts that the proportion of digital payments will grow to 65% by 2026.

In 2023, total assets in the public and private banking sectors were US$ 1686.70 billion and US$ 1016.39 billion, respectively. In 2023, assets of public sector banks accounted for 58.31% of the total banking assets (including public, private sector and foreign banks).

The interest income of public banks reached US$ 102.4 billion in 2023. In 2023, interest income in the private banking sector reached US$ 70 billion.

India's digital lending market witnessed a growth of CAGR 39.5% over a span of 10 years. The Indian digital consumer lending market is projected to surpass US$ 720 billion by 2030, representing nearly 55% of the total US$ 1.3 trillion digital lending market opportunity in the country.

According to RBI’s Scheduled Banks’ Statement, deposits of all scheduled banks collectively surged by a whopping Rs 2.04 lakh crore (US$ 2,452 billion) as of FY24.

According to the RBI, bank deposits stood at Rs. 209.36 trillion (US$ 2507.62 billion) as of May 3, 2024.

Investments/Developments

Key investments and developments in India’s banking industry include:

• Digital payments have significantly increased in recent years, because of coordinated efforts of the Government and RBI with all the stakeholders, UPI volume for FY24 (until May) recorded to 27,338.
• Google India Digital Services (P) Limited and NPCI International Payments Ltd (NIPL), have signed a Memorandum of Understanding (MoU) to expand the transformative impact of UPI to countries beyond India.
• Warehousing Development Regulatory Authority and Punjab & Sind Bank signed Memorandum of Understanding to facilitate low interest rate loans to farmers.
• Fincare Small Finance Bank Limited (Fincare) and AU Small Finance Bank Limited (AU) has merged, with AU being the surviving entity (merged entity).
• In December 2023, ICICI Prudential Life Insurance and Ujjivan Small Finance Bank forged the Bancassurance Partnership.
• In October 2023, AU Small Finance Bank announced the acquisition of Fincare Small Finance Bank in an all-share deal and to merge it with itself.
• According to data released by the National Payments Corporation of India (NPCI), UPI transactions reached 10.241 billion until August 30th, 2023.
• In September 2023, Hitachi Payment Services launched India's first-ever UPI-ATM with NPCI.
• In September 2023, the Reserve Bank of India is likely to bring in CBDC in the call money market.
• In July 2023, Mahindra and Mahindra acquires minority stake in RBL Bank.
• In July 2023, State Bank of India to acquire 100% stake of SBI Capital in SBICAP Ventures for US$ 85.25 million (Rs. 708 crore).
• In June 2023, State Bank of India to acquire entire 20% stake of SBI Capital Markets in SBI Pension Funds.
• In April 2023, HDFC Bank to acquire 20% or more in Griha Pte subsidiary of HDFC Investments.
• M&A activity with an India angle hit a record US$ 171 billion in 2022.
• In April 2022, IDFC to sell Mutual Fund Business to Bandhan-Financial Holdings led Consortium for US$ 550.23 million (Rs. 4,500 crore).
• In March 2022, aggressive Axis Bank acquired Citi's India consumer business for US$ 1.6 billion.
• In December 2022, HDFC Bank to buy 7.75% stake in fintech start-up Mintoak.
• As per report by Refinitiv, Domestic M&A activity saw record levels of activity in 2022 at US$ 119.2 billion, up 156.3% from 2021. Companies like HDFC Bank, HDFC, Ambuja Cements, ACC, Adani Group Biocon, Mindtree, L&T Infotech, AM/NS, Essar Ports were involved in M&A deals in 2022.
• On June 2022, the number of bank accounts—opened under the government’s flagship financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’—reached 45.60 crore and deposits in the Jan Dhan bank accounts totalled Rs. 1.68 trillion (US$ 21.56 billion).
• In April 2022, India’s largest private bank HDFC Bank announced a transformational merger with HDFC Limited.
• On November 09, 2021, RBI announced the launch of its first global hackathon 'HARBINGER 2021 – Innovation for Transformation' with the theme ‘Smarter Digital Payments’.
• In November 2021, Kotak Mahindra Bank announced that it has completed the acquisition of a 9.98% stake in KFin Technologies for Rs. 310 crore (US$ 41.62 million).
• In October 2021, Indian Bank announced that it has acquired a 13.27% stake in the proposed National Asset Reconstruction Company Ltd. (NARCL).
• In July 2021, Google Pay for Business has enabled small merchants to access credit through tie-up with the digital lending platform for MSMEs—FlexiLoans.
• In February 2021, Axis Bank acquired a 9.9% share in the Max Bupa Health Insurance Company for Rs. 90.8 crore (US$ 12.32 million).
• In December 2020, in response to the RBI’s cautionary message, the Digital Lenders’ Association issued a revised code of conduct for digital lending.
• On November 6, 2020, WhatsApp started UPI payments service in India on receiving the National Payments Corporation of India (NPCI) approval to ‘Go Live’ on UPI in a graded manner.
• In October 2020, HDFC Bank and Apollo Hospitals partnered to launch the ‘HealthyLife Programme’, a holistic healthcare solution that makes healthy living accessible and affordable on Apollo’s digital platform.
• In 2019, banking and financial services witnessed 32 M&A (merger and acquisition) activities worth US$ 1.72 billion.
• In April 2020, Axis Bank acquired additional 29% stake in Max Life Insurance.
• In March 2020, State Bank of India (SBI), India’s largest lender, raised US$ 100 million in green bonds through private placement.
• In February 2020, the Cabinet Committee on Economic Affairs gave its approval for continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year beyond 2019-20 - till 2020-21 to those RRBs which are unable to maintain minimum Capital to Risk weighted Assets Ratio (CRAR) of 9% as per the regulatory norms prescribed by RBI.

Government Initiatives

• As of May 2024, the Jan Dhan Yojana scheme has banked 52.30 crore beneficiaries, with a total amount of Rs. 2,28,057 crore (US$ 27.32 billion).
• Bank accounts opened under GoI Pradhan Mantri Jan Dhan Yojana have deposits of over ~US$ 25.13 billion in beneficiary accounts. 51.11 crore beneficiaries banked till December 15 th , 2023.
• In September 2023, IREDA partners with banks to boost renewable energy projects in India.
• In March 2023, India Post Payments Bank (IPPB), in collaboration with Airtel, announced the launch of WhatsApp Banking Services for IPPB customers in Delhi.
• In October 2022, Prime Minister Mr. Narendra Modi inaugurated 75 Digital Banking Units (DBUs) across 75 districts in India.
• In Union Budget 2023, a national financial information registry would be constructed to serve as the central repository for financial and ancillary data.
• In Union Budget 2023, the KYC process will be streamlined by using a 'risk-based' strategy rather than a 'one size fits all' approach.
• National Asset reconstruction company (NARCL) will take over, 15 non-performing loans (NPLs) worth Rs. 50,000 crore (US$ 6.70 billion) from the banks.
• National payments corporation India (NPCI) has plans to launch UPI lite which will provide offline UPI services for digital payments. Payments of up to Rs. 200 (US$ 2.67) can be made using this.
• In the Union budget of 2022-23 India has announced plans for a central bank digital currency (CBDC) which will be possibly known as Digital Rupee.
• In November 2021, RBI launched the ‘RBI Retail Direct Scheme’ for retail investors to increase retail participation in government securities.
• The RBI introduced new auto debit rules with a mandatory additional factor of authentication (AFA), effective from October 01, 2021, to improve the safety and security of card transactions, as part of its risk mitigation measures.
• In September 2021, Central Banks of India and Singapore announced to link their digital payment systems by July 2022 to initiate instant and low-cost fund transfers.
• In August 2021, Prime Minister Mr. Narendra Modi launched e-RUPI, a person and purpose-specific digital payment solution. e-RUPI is a QR code or SMS string-based e-voucher that is sent to the beneficiary’s cell phone. Users of this one-time payment mechanism will be able to redeem the voucher at the service provider without the usage of a card, digital payments app, or internet banking access.
• As per Union Budget 2021-22, the government will disinvest IDBI Bank and privatise two public sector banks.
• Government smoothly carried out consolidation, reducing the number of Public Sector Banks by eight.
• In May 2022, Unified Payments Interface (UPI) recorded 5.95 billion transactions worth Rs. 10.41 trillion (US$ 133.46 billion).
• According to the RBI, India’s foreign exchange reserves reached US$ 630.19 billion as of February 18, 2022.
• The number of transactions through immediate payment service (IMPS) reached 430.67 million and amounted to Rs. 3.70 trillion (US$ 49.75 billion) in October 2021.
• The RBI has launched a pilot to digitalize KCC lending in a bid for efficiency, higher cost savings, and reduction of TAT. This is expected to transform the flow of credit in the rural economy.
• As per the Union Budget 2023-24, the RBI has launched a pilot to digitalize Kisan Credit Card (KCC) lending in a bid for efficiency, higher cost savings, and reduction of TAT. This is expected to transform the flow of credit in the rural economy.
• As per the Union Budget 2023-24, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. Taking forward this agenda, and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units in 75 districts of the country by Scheduled Commercial Banks.
• Additionally, the government proposed to introduce a digital rupee or a Central Bank Digital Currency (CBDC) which would be issued by the RBI using blockchain and other technologies.
• The government also proposed to bring all the 150,000 post offices under the digital banking core business to enable financial inclusion.
• As per the economic survey 2022-23, the permission by RBI to lending institutions to grant a total moratorium of 6 (3+3) months in case of payment failure due between 1st March 2020 to 31st August 2020, infusion of US$ 9.1 billion (Rs. 75,000 crore) for Non-Banking Financial Corporations (NBFCs), Housing Finance Companies (HFCs) and Micro Finance Institutions (MFIs), among others, have also contributed to the revival of the real estate sector. The permission by RBI to lending institutions to grant a total moratorium of 6 (3+3) months in case of payment failure due between 1st March 2020 to 31st August 2020, infusion of US$ 9.1 billion (Rs. 75,000 crore) for Non-Banking Financial Corporations (NBFCs), Housing Finance Companies (HFCs) and Micro Finance Institutions (MFIs), among others, have also contributed to the revival of the real estate sector.
• According to the Economic Survey 2022-23, Over the last few years, the number of neo banking platforms and global investments in the neo-banking segment has also risen consistently. Neo-banks operate under mainstream finance's umbrella but empower specific services long associated with traditional institutions such as banks, payment providers, etc.

Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth in the banking sector. All these factors suggest that India’s banking sector is poised for robust growth as rapidly growing businesses will turn to banks for their credit needs. The advancement in technology has brought mobile and internet banking services to the fore. AI and automation are demonstrating unprecedented value while Blockchain has sparked innovation throughout the business landscape and is poised to continue in doing so. The banking sector is laying greater emphasis on providing improved services to their clients and upgrading their technology infrastructure to enhance customer’s overall experience as well as give banks a competitive edge.

In recent years India has experienced a rise in fintech and microfinancing. India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion by FY23 driven by the five-fold increase in digital disbursements. The Indian fintech market has attracted US$ 29 billion in funding over 2,084 deals so far (January 2017-July 2022), accounting for 14% of global funding and ranking second in terms of deal volume.

By 2025, India's fintech market is expected to reach Rs. 6.2 trillion (US$ 83.48 billion).

References:   Media Reports, press releases, Reserve Bank of India, Press Information Bureau, www.pmjdy.gov.in , Union Budget 2023-24, Economic Survey 2023-24

Note: Conversion rate used in April 2024, Rs. 1 = US$ 0.012, * - according to an FIS report, # - Microfinances Institution Network

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Reforms in Indian Banking Sector: A Paradigm Shift in Growth and Financial Inclusion in India

• First Online: 24 March 2024

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• K. Srinivasan   ORCID: orcid.org/0009-0004-4164-9778 3 ,
• K. Ramesh   ORCID: orcid.org/0000-0003-0105-0643 3 ,
• K. Gunasekaran   ORCID: orcid.org/0009-0007-3023-427X 3 &
• K. Sivasubramanian   ORCID: orcid.org/0000-0001-6137-0847 4  

Part of the book series: Studies in Systems, Decision and Control ((SSDC,volume 223))

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Banking sector reforms was the important initiative of the government to achieve the goal of financial inclusion and better performance of the banks in terms of their services and profitability. Though there is significant disagreement as to whether the 1991 reforms served as the exclusive catalyst for India’s reform movement. Without a doubt, the actions that were thereafter disclosed had a significant effect. The 1990s reforms started by the Narasimham Committee, like risk-based supervision and stricter capital adequacy requirements, were crucial in changing the banking industry. A more stable and effective industry has been ensured by the Basel Norms’ implementation, which has also strengthened the banking system’s resilience and risk management procedures. This paper adopts descriptive method of research which focuses to understand the significance of banking sector in India for promotion of financial inclusion and to analyse the various banking sector reforms and its implications on financial inclusivity and performance. To achieve these goals, the secondary data from Reserve Bank of India and has been collected and interpreted. Over the past five years, the scheduled commercial banks have demonstrated a rising tendency in the quantity of operational branches (Sharma and Choubey in Environ. Dev. Sustain. 24:293–319, 2022). The semi-urban area with the highest growth rate, 42.3%, was identified by the commercial banks. In five years, the total amount of branches rose from 19,126 to 27,219. Rural areas are growing at a rate of 20.5%, which is lower than other regions, but it is still trending upward and will get much better as a result of the actions the RBI has done to promote financial inclusion. There is an increase of 24% in bank branches operating in metropolitan areas was seen between 2009 and 2013, with a total of 14,325 branches in 2009 (Laxman et al. in Paradigm Shift in Indian Banking. New Delhi, pp. 70–80, 2008).

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Sharma, M., Choubey, A.: Green banking initiatives: a qualitative study on Indian banking sector. Environ. Dev. Sustain. 24 (1), 293–319 (2022). https://doi.org/10.1007/s10668-021-01426-9

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Srinivasan, K., Ramesh, K., Gunasekaran, K., Sivasubramanian, K. (2024). Reforms in Indian Banking Sector: A Paradigm Shift in Growth and Financial Inclusion in India. In: El Khoury, R. (eds) Technology-Driven Business Innovation. Studies in Systems, Decision and Control, vol 223. Springer, Cham. https://doi.org/10.1007/978-3-031-51997-0_36

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Banking industry in India - statistics & facts

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Number of member banks affiliated to NFS in India from August 2018 to June 2023

Online banking frauds reported in India 2022, by state

Number of online banking frauds reported across India in 2022, by state

Government initiatives

• Premium Statistic Number of rural and urban PMJDY recipients in India 2023, by sector
• Premium Statistic Value of PMJDY deposits in India 2023, by sector
• Premium Statistic Number of PMJDY recipients in India 2023, by public sector bank
• Premium Statistic Value of PMJDY deposits in India 2023, by public sector bank
• Premium Statistic Number of PMJDY recipients in India 2023, by major private bank
• Premium Statistic Value of PMJDY deposits in India 2023, by major private bank
• Premium Statistic Number of loan accounts under PMMY scheme India FY 2021, by category
• Premium Statistic Value of sanctioned loans under PMMY scheme India FY 2022, by financial institution

Number of rural and urban PMJDY recipients in India 2023, by sector

Number of Pradhan Mantri Jan-Dhan Yojana recipients in India as of August 2023, by type and sector (in millions)

Value of PMJDY deposits in India 2023, by sector

Value of Pradhan Mantri Jan-Dhan Yojana deposits in India as of August 2023, by sector (in billion Indian rupees)

Number of PMJDY recipients in India 2023, by public sector bank

Number of Pradhan Mantri Jan-Dhan Yojana recipients in India as of August 2023, by public sector bank (in millions)

Value of PMJDY deposits in India 2023, by public sector bank

Value of Pradhan Mantri Jan-Dhan Yojana deposits in India as of August 2023, by public sector bank (in billion Indian rupees)

Number of PMJDY recipients in India 2023, by major private bank

Number of Pradhan Mantri Jan-Dhan Yojana recipients in India as of August 2023, by major private bank (in millions)

Value of PMJDY deposits in India 2023, by major private bank

Value of Pradhan Mantri Jan-Dhan Yojana deposits in India as of August 2023, by major private bank (in million Indian rupees)

Number of loan accounts under PMMY scheme India FY 2021, by category

Number of loan accounts under Pradhan Mantri Mudra Yojana (PMMY) in India in financial year 2021, by category (in 1,000s)

Value of sanctioned loans under PMMY scheme India FY 2022, by financial institution

Value of sanctioned loans under Pradhan Mantri Mudra Yojana (PMMY) in India in financial year 2022, by financial institution (in billion Indian rupees)

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Enlisted are the critical insights and takeaways for July – Sep’23 :

• FY23 banking system credit was up 15% YoY with private and PSU banks growing at 18% and 14% respectively. However, the deposit growth remain modest – 9.5% in Sept 2022
• PSBs are aggressively gaining credit market share on an incremental basis with ~53% share. Private banks contributed 47% to incremental credit share while foreign banks contributed <1%.
• The top five PSBs mobilised a total of Rs 8.43 trillion in deposits in FY23. The rise in deposits can be attributed to the large branch network and growing partnerships of PSU banks with third party players, including business correspondents and fintech.
• There are some anecdotal signs of private capex coming back.
• Rise in policy rates led to faster repricing of loan yields across banks in FY23
• Overall, FY2023 has been encouraging, with sustained momentum in growth, expansion in margins, below average NPL formation and one of the best years for return ratios.

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All you need to know about the indian banking sector.

Sakshi Dhakre

Created on 13 Dec 2023

Wraps up in 5 Min

Read by 8k people

Updated on 14 Dec 2023

India's banking scene is quite a spectacle! Don't trust me? Let me prove my point using data. We have 12 public sector banks , 22 private counterparts, 46 foreign players, 56 regional rural banks , 1,485 urban cooperative banks , and 96,000 rural cooperative banks .  As of March 2023 , the nation boasts a total of 14,74,548 ATMs , with a notable 2,796 added in just the first four months of FY23, showcasing a robust momentum in banking infrastructure expansion.

But the real magic happens on our phones and computers. In villages, folks are opening new bank accounts without even stepping out; everything's going digital! Imagine getting a loan approval as fast as your favourite street food vendor hands you a plate of chaat. That's how quick it is! And speaking of speed, India's digital lending market is soaring with a 39.5% growth over a decade. 

And guess what? India is becoming a FinTech superhero, set to be the third-biggest in the world by 2025, valued at US$150 billion . 

Growth ka scope toh bohat hain,  but understanding the details is very important. So, let's begin with a few basics about the banking sector.

About the Banking Sector

In simple terms, banking is the art of handling, creating, and managing money matters. Now, why is banking a big deal? Well, it's not just about safeguarding your cash. Banks wear many hats, from creating money to securing it, managing deposits, handling investments, and even taking care of international money transfers. 

According to the Reserve Bank of India (RBI), our banking system is in top-notch shape. It's well-capitalised and regulated, and we're rocking better financial and economic conditions compared to any other country. Even when the world faced a financial crisis, Indian banks stood strong against credit, market, and liquidity risks.

But hold on, there's more to the story. Lately, modern banking models such as payment and small finance banks have made their way into the Indian banking sector. This reminds me of an article on the upcoming IPO of India's first small finance bank. You should definitely check it out here: Capital Small Finance Bank IPO .

Now, let's talk about game-changers. The RBI has pulled some fresh moves that could seriously revamp our local banking scene. Just look at the numbers: over 48.6 crore bank accounts under the Pradhan Mantri Jan Dhan Yojana , with approximately ₹1,98,440 crore in deposits . That's 50.18 crore beneficiaries banked by August 2023!

India is on track to become the third-largest domestic banking sector by 2050.

Take a glance at the graph below to catch the trend in deposit amounts. From ₹94.23 lakh crore in 2016 , the deposits soared to around ₹176.19 lakh crore in 2023 , marking an impressive Compound Annual Growth Rate (CAGR) of 6.75%. 

Understanding the Structure of the Indian Banking Sector

Direct your attention to the infographic beneath, revealing the layout of the Indian banking sector. Positioned at the apex is the Reserve Bank of India, overseeing both the Banks and the Financial Institutions.

Now that you've grasped the structure let me walk you through some crucial statistics.

Key Statistics of the Banking Sector

Figures talk, and in today's world, data is the name of the game. Understanding this industry is all about diving into the digits. Let's start with the basics- the total assets in the banking sector.

In the fiscal year 2022-23, the public and private banking sectors held total assets of ₹138.38 lakh crore and ₹83.39 lakh crore , respectively.

Breaking it down further, public sector banks took the lead, contributing a substantial 58.81% to the total banking assets, encompassing public, private sector, and foreign banks alike.

Let's shift our focus to the growth in interest income- something worth noting. Public sector banks dominated, contributing over 48.05% to the interest income in 2022-23.

Breaking it down:

• The interest income of public banks reached ₹8.41 lakh crore in the fiscal year 2022-23 .
• Meanwhile, in the private banking sector, interest income reached ₹5.74 lakh crore during the same period. 

Now, onto other key observations:

• In 2022-23, public sector banks claimed about 49.52% of other income, with a substantial ₹1.19 lakh crore .
• On the flip side, the private banking sector raked  ₹1.07 lakh crore in 'other income' during the same fiscal year.

According to Reserve Bank of India rules, banks are required to set aside 4.50% of deposits as Cash Reserve Ratio (CRR) and an additional 18% in Statutory Liquidity Ratio (SLR) compliant holdings.

After decoding the financial language through these insightful numbers, let's move on to the…

Importance of the banking sector

Let's discuss the vital role of the banking sector- it's the backbone of the entire financial industry. By providing crucial infrastructure, financing options, and investment opportunities, it significantly impacts the national economy.

The economic development and growth of any nation hinge greatly on the strength and efficiency of its banking industry.

Thanks to the wonders of computers and microprocessors, most banks have embraced automation. This means financial transactions are now faster and more straightforward. Plus, entrepreneurs benefit from easier access to funding for their ventures.

Here's a surprising fact: the financial sector carries a substantial weightage of 36.81% in Nifty50 .

In a nutshell, the banking sector isn't just a player; it's a " khiladi " changing the game, charting the path for national economic " Vijay ."

The Bottom Line

So there you have it! The Indian banking sector is like a powerhouse, always on the move and growing at a fast clip.

Whether in quiet villages or busy cities, it's transforming lives with its digital innovation and a world of possibilities.

If you're curious about understanding how to analyse banking stocks, make sure to take a look at " How to do Sector-Wise Comparison of Companies? " Also, if you want to know the List of Private Bank Sector and Public Bank Sector Stocks with Industry Classification then click on the link.

And that wraps up this article, folks! Until next time, ciao and cheerio! 👋

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Sakshi is an adventurous spirit who enjoys both the intellectual stimulation of Finance and the sensory experiences of good food and nature’s beauty. She has a passion for delving into complex financial topics and distilling them down into easy-to-understand insights. When she's not poring over financial reports, you might find her exploring a new corner of the city, trying out new restaurants and cuisines or admiring the beauty of the night sky.

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Mastering the new realities of India’s banking sector

India’s banking sector is a study in contrasts: it supports the world’s fastest-growing large economy but is grappling with challenges that test its strength and resilience.

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Primary among them is the burden of distressed loans. According to Reserve Bank of India (RBI) data, the value of banks’ gross nonperforming assets (GNPA) and restructured assets reached $150 billion in April 2016 and has been growing by almost 25 percent year on year since 2013. State-owned banks account for more than three-fourths of the stressed-asset load, which is now far higher than their net worth. Provision levels are inadequate because these banks hold only 28 percent of GNPAs and restructured assets as provisions. There is a gap of close to $110 billion between the system’s stressed assets and the provisions made. These problems are considerably less severe for private banks.

Yet headline numbers do not tell the entire story, and there are many layers to the changing face of banking and finance in the world’s second most populous country. Even as legacy banks continue to be under pressure from stressed assets and stagnant loan growth, the sector as a whole represents one of the world’s biggest opportunities to create value in banking. Macroeconomic fundamentals continue to be strong, the country is in the midst of a digital revolution , and the ongoing disruptive changes (including momentum on the regulatory front) point to possibilities for both new entrants and incumbent banks.

The Indian government’s twin thrusts—to encourage digital identification and cashless transactions—are driving change throughout the economy . These measures picked up steam after the Unique Identification Authority of India (UIDAI), a statutory body responsible for providing the country’s residents with a biometric identity and a digital platform to authenticate it, was set up in 2016. The UIDAI has issued more than a billion unique identity (Aadhaar) cards, covering most of the country’s adult population. The government is pushing the whole financial system to use this unified identification system, and that has major implications for the sector. The system, which can be used not only for verifying customers but also for loans, direct transfers of subsidies, and a host of other financial transactions, could change the contours of formal and informal business in India.

In addition to the push for digitization,  new policies favor financial inclusion and promote competition by allowing new domestic players to set up payments banks (which can only accept deposits and cannot issue loans or credit cards) and small-finance banks (which provide basic banking services to underserved sections of the economy). The further easing of norms, such as permission to set up wholly owned subsidiaries, makes it easier for foreign banks to enter India’s banking sector. Although processes are evolving, regulatory interventions point to the emergence of a digital, inclusive, and interoperable financial-services market in India.

A difficult legacy for Indian banking

Public-sector banks are more exposed to industry sectors with a higher share of nonperforming loans than their private-sector counterparts are. These state-owned institutions have deep networks and control 70 percent of banking’s asset base. From 2009 to 2016, the government made capital infusions of $15 billion into them. But over the years, value has steadily shifted toward private-sector institutions, whose share of the sector’s assets has grown to 25 percent, from 21 percent, in the past decade. 1 1. Reserve Bank of India (RBI) data and annual reports of banks. (Foreign banks account for the remaining 5 percent.) The division is more apparent in the value banks created from 2006 to 2016: private banks have grown faster and generated far more value for their shareholders, with their share of market cap increasing from about 40 percent to nearly 70 percent in the same period.

Loan growth in fiscal year 2017 has remained anemic—the banks’ credit books shrank by 4 percent in the past quarter (Exhibit 1). With the balance sheets of major Indian companies continuing to be under stress, the volume of corporate loans fell by 3 percent from April to December 2016. Roughly 40 percent of the outstanding debt is to companies whose interest-coverage ratio is less than one, 2 2. Analysis of data from Prowess, RBI, and company reports. making debt repayment difficult. Overall, the recovery of wholesale-banking loans seems difficult in the medium term.

The Indian government’s decision to demonetize the currency—about 85 percent of it ceased to be legal tender on November 8, 2016—led to a surge in the current and savings-account (CASA) deposits of the country’s banks. Slow loan growth, combined with the higher CASA, has pushed down the banks’ credit-deposit ratios, a standard measure of loans to deposits. If credit offtake fails to pick up, these factors could affect the banks’ net interest income.

Promising developments in India

Notwithstanding the sectoral doom and gloom, India’s macroeconomic fundamentals continue to be strong . GDP has increased at 6.6 to 7.0 percent over the past four years, and International Monetary Fund projections show an upward trend—growth could reach 7.7 percent by 2020. Wholesale and retail inflation have been trending downward over the past three years.

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The expansion and upward mobility of the middle class have transformed retail banking in India over the past decade. We expect these changes to continue as about 89 million households join this social segment by 2025. 3 3. India’s ascent: Five opportunities for growth and transformation , McKinsey Global Institute, August 2016. Upwardly mobile customers are more discerning, which is reflected in loyalty levels. Compared with their predecessors a decade ago, such consumers are half as likely to recommend a financial institution to an acquaintance and 15 percent more likely to shop around. They also have nearly 20 percent more banking relationships, on average.

These new customers, who represent the opening up of the banking marketplace, are more likely than yesterday’s to be attracted by one or another emerging value proposition. Most of them are rapid technology adopters, whose use of the Internet and mobile phones is growing (Exhibit 2). The falling cost of Internet access has facilitated the adoption of digital technologies. By December 2016, mobile data rates in India had fallen to almost 50 percent of their 2013 levels. 4 4. Airtel and Idea annual reports. Digital demand has shot up in consequence—exponential growth in the number of users and Internet use. More consumers rely on the Internet and mobile phones to meet their banking needs. The Indian Banks’ Association’s 2016 survey shows that almost 80 percent of transactions in the newer banks are made through digital channels.

At the same time, a regulatory push by the government and the RBI over the past few years is encouraging more competition and the emergence of digital business models. New categories of banking licenses have been launched—such as payments banks and small-finance banks. It’s also become easier for foreign players to enter the market, since they can now set up wholly owned subsidiaries in the country. This means that they can operate much as Indian-owned banks do, without restrictions on their branch footprints or their efforts to raise domestic capital.

Meanwhile, the government has launched what it calls the Jan Dhan (People’s Money) program, opening bank accounts for millions of previously unbanked customers to promote financial inclusion. About 280 million such accounts have been set up as of March 2017, 5 5. Pradhan Mantri Jan Dhan Yojana, pmjdy.gov.in. allowing users to receive government subsidies and to access remittances, credit, insurance, and so on. Low-cost Indian platforms have been launched to promote digital payments—for example, RuPay, a cheaper, domestic alternative to international credit- or debit-card gateways such as MasterCard and Visa; the Unified Payment Interface (UPI), a system to facilitate the transfer of funds between bank accounts on the mobile platform; and the Bharat Interface for Money (BHIM), a mobile app based on UPI.

The availability of data in India has become more democratic, and with IndiaStack and open application programming interfaces (APIs) banks can now access customer information from a single source. Many of these digital-finance initiatives use the national unique identification number (Aadhaar) to authenticate customers. The recently launched DigiLocker, for example, is a cloud-based document-repository system that enables the sharing of digitized identity documents and certificates.

These developments give financial players opportunities to build innovative business models serving millions of new consumers. Both new entrants, free of legacy issues and with much lower infrastructure costs, and innovative incumbents have an advantage in reaching and serving customers. Since many existing banks have balance-sheet limitations, relatively unconstrained ones also have an opportunity to take over some wholesale loans on their own terms. In addition, disruptions, both in technology and policy, could help new banks create value and increase their efficiency.

Moving the banking sector forward

Despite the tremendous potential and opportunity, incumbents and new entrants alike could use a few boosts to overcome traditional roadblocks.

Leverage the ‘data tsunami’ for customer insights

Reliable, diverse data sources are emerging in India, and these could be used to make smarter and faster decisions in financial services (Exhibit 3). In addition to the traditional sources, such as financial-transaction records and credit bureaus,  banks can now tap into information from e-commerce purchases, utility payments, and social media.

With Aadhaar identifying individual customers, financial-services players can also serve them more intelligently, with faster approvals, more customized products, and better underwriting decisions. Combining traditional and nontraditional sources of data on customers allows players to get a more comprehensive picture of them.  Many fintechs are already encroaching on the traditional banking space by using the “data tsunami” to come up with disruptive business models that address unmet financing needs.

Cultivate partnership-driven digital ecosystems

Some of the most significant opportunities in Indian banking over the next three to five years will accrue to partnerships, a strategy that will require banks to embed themselves in the daily lives of customers to meet their financing needs. A payments bank, for example, can allow customers to cash in or cash out through local retailer outlets, bypassing the need for traditional (and more expensive) branches and ATMs.

This approach will require banks to build close relationships with partners, creating integrated digital infrastructures that span their individual platforms. This mechanism of being able to embed into another ecosystem and build an entirely digital model, relies on the physical networks of the partners to access customers. It has the potential to change the economics and the ability to serve underserved segments.

India’s ascent: Five opportunities for growth and transformation

Tap growing credit demand from small and midsize enterprises.

With corporate loan books continuing to shrink, the next growth opportunity will be serving India’s vast number of small and medium enterprises (SMEs). Currently, most of them look to the informal sector and nonbanking financial companies for their financing needs. With the push from the informal to the formal economy, an estimated 50 million SMEs could enter the formal banking space by 2020. 6 6. McKinsey Small and Medium Enterprises Survey, 2014.

Traditional banks will face challenges to serve these customers in the face of stiff competition from nonbanking financial companies and fintechs. Small businesses that turn to informal financing channels do so because they cannot raise the collateral banks require. High interest rates, indebtedness, and processing demands are frequently cited reasons for bypassing formal lenders. To address these issues, banks will need to review their traditional lending mechanisms, which are not suitable for SMEs or micro, small, and medium enterprises. To assess the creditworthiness of SMEs, price risk, and set appropriate loan limits, banks will need to use unstructured data—such as prior transaction details and data from the Goods and Services Tax (GST) platform and even from social media.

As we said at the outset, India’s banking sector is at a crossroads. Traditional players face huge disruptions, while digital growth is propelling changes in technology and customer mind-sets. This period of disruption presents tremendous growth opportunities. Old banks will need to  make bold moves and initiate major transformations to take advantage of them. The path for new players, which are not saddled with the problems of the past, and for existing but relatively unconstrained banks is considerably easier. Those that master these new realities could build truly world-class banking businesses at scale.

To request a copy of the full report, see “ Mastering new realities: A blueprint to transform Indian banking .”

Aditya Sharma is an associate partner in McKinsey’s Bangalore office, and  Renny Thomas is a senior partner in the Mumbai office.

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Research Topics & Ideas: Finance

PS – This is just the start…

We know it’s exciting to run through a list of research topics, but please keep in mind that this list is just a starting point . To develop a suitable education-related research topic, you’ll need to identify a clear and convincing research gap , and a viable plan of action to fill that gap.

Overview: Finance Research Topics

• Corporate finance topics
• Investment banking topics
• Private equity & VC
• Asset management
• Hedge funds
• Financial planning & advisory
• Quantitative finance
• Treasury management
• Financial technology (FinTech)
• Commercial banking
• International finance

Corporate Finance

These research topic ideas explore a breadth of issues ranging from the examination of capital structure to the exploration of financial strategies in mergers and acquisitions.

• Evaluating the impact of capital structure on firm performance across different industries
• Assessing the effectiveness of financial management practices in emerging markets
• A comparative analysis of the cost of capital and financial structure in multinational corporations across different regulatory environments
• Examining how integrating sustainability and CSR initiatives affect a corporation’s financial performance and brand reputation
• Analysing how rigorous financial analysis informs strategic decisions and contributes to corporate growth
• Examining the relationship between corporate governance structures and financial performance
• A comparative analysis of financing strategies among mergers and acquisitions
• Evaluating the importance of financial transparency and its impact on investor relations and trust
• Investigating the role of financial flexibility in strategic investment decisions during economic downturns
• Investigating how different dividend policies affect shareholder value and the firm’s financial performance 

Investment Banking

The list below presents a series of research topics exploring the multifaceted dimensions of investment banking, with a particular focus on its evolution following the 2008 financial crisis.

• Analysing the evolution and impact of regulatory frameworks in investment banking post-2008 financial crisis
• Investigating the challenges and opportunities associated with cross-border M&As facilitated by investment banks.
• Evaluating the role of investment banks in facilitating mergers and acquisitions in emerging markets
• Analysing the transformation brought about by digital technologies in the delivery of investment banking services and its effects on efficiency and client satisfaction.
• Evaluating the role of investment banks in promoting sustainable finance and the integration of Environmental, Social, and Governance (ESG) criteria in investment decisions.
• Assessing the impact of technology on the efficiency and effectiveness of investment banking services
• Examining the effectiveness of investment banks in pricing and marketing IPOs, and the subsequent performance of these IPOs in the stock market.
• A comparative analysis of different risk management strategies employed by investment banks
• Examining the relationship between investment banking fees and corporate performance
• A comparative analysis of competitive strategies employed by leading investment banks and their impact on market share and profitability

Private Equity & Venture Capital (VC)

These research topic ideas are centred on venture capital and private equity investments, with a focus on their impact on technological startups, emerging technologies, and broader economic ecosystems.

• Investigating the determinants of successful venture capital investments in tech startups
• Analysing the trends and outcomes of venture capital funding in emerging technologies such as artificial intelligence, blockchain, or clean energy
• Assessing the performance and return on investment of different exit strategies employed by venture capital firms
• Assessing the impact of private equity investments on the financial performance of SMEs
• Analysing the role of venture capital in fostering innovation and entrepreneurship
• Evaluating the exit strategies of private equity firms: A comparative analysis
• Exploring the ethical considerations in private equity and venture capital financing
• Investigating how private equity ownership influences operational efficiency and overall business performance
• Evaluating the effectiveness of corporate governance structures in companies backed by private equity investments
• Examining how the regulatory environment in different regions affects the operations, investments and performance of private equity and venture capital firms

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Asset Management

This list includes a range of research topic ideas focused on asset management, probing into the effectiveness of various strategies, the integration of technology, and the alignment with ethical principles among other key dimensions.

• Analysing the effectiveness of different asset allocation strategies in diverse economic environments
• Analysing the methodologies and effectiveness of performance attribution in asset management firms
• Assessing the impact of environmental, social, and governance (ESG) criteria on fund performance
• Examining the role of robo-advisors in modern asset management
• Evaluating how advancements in technology are reshaping portfolio management strategies within asset management firms
• Evaluating the performance persistence of mutual funds and hedge funds
• Investigating the long-term performance of portfolios managed with ethical or socially responsible investing principles
• Investigating the behavioural biases in individual and institutional investment decisions
• Examining the asset allocation strategies employed by pension funds and their impact on long-term fund performance
• Assessing the operational efficiency of asset management firms and its correlation with fund performance

Hedge Funds

Here we explore research topics related to hedge fund operations and strategies, including their implications on corporate governance, financial market stability, and regulatory compliance among other critical facets.

• Assessing the impact of hedge fund activism on corporate governance and financial performance
• Analysing the effectiveness and implications of market-neutral strategies employed by hedge funds
• Investigating how different fee structures impact the performance and investor attraction to hedge funds
• Evaluating the contribution of hedge funds to financial market liquidity and the implications for market stability
• Analysing the risk-return profile of hedge fund strategies during financial crises
• Evaluating the influence of regulatory changes on hedge fund operations and performance
• Examining the level of transparency and disclosure practices in the hedge fund industry and its impact on investor trust and regulatory compliance
• Assessing the contribution of hedge funds to systemic risk in financial markets, and the effectiveness of regulatory measures in mitigating such risks
• Examining the role of hedge funds in financial market stability
• Investigating the determinants of hedge fund success: A comparative analysis

Financial Planning and Advisory

This list explores various research topic ideas related to financial planning, focusing on the effects of financial literacy, the adoption of digital tools, taxation policies, and the role of financial advisors.

• Evaluating the impact of financial literacy on individual financial planning effectiveness
• Analysing how different taxation policies influence financial planning strategies among individuals and businesses
• Evaluating the effectiveness and user adoption of digital tools in modern financial planning practices
• Investigating the adequacy of long-term financial planning strategies in ensuring retirement security
• Assessing the role of financial education in shaping financial planning behaviour among different demographic groups
• Examining the impact of psychological biases on financial planning and decision-making, and strategies to mitigate these biases
• Assessing the behavioural factors influencing financial planning decisions
• Examining the role of financial advisors in managing retirement savings
• A comparative analysis of traditional versus robo-advisory in financial planning
• Investigating the ethics of financial advisory practices

The following list delves into research topics within the insurance sector, touching on the technological transformations, regulatory shifts, and evolving consumer behaviours among other pivotal aspects.

• Analysing the impact of technology adoption on insurance pricing and risk management
• Analysing the influence of Insurtech innovations on the competitive dynamics and consumer choices in insurance markets
• Investigating the factors affecting consumer behaviour in insurance product selection and the role of digital channels in influencing decisions
• Assessing the effect of regulatory changes on insurance product offerings
• Examining the determinants of insurance penetration in emerging markets
• Evaluating the operational efficiency of claims management processes in insurance companies and its impact on customer satisfaction
• Examining the evolution and effectiveness of risk assessment models used in insurance underwriting and their impact on pricing and coverage
• Evaluating the role of insurance in financial stability and economic development
• Investigating the impact of climate change on insurance models and products
• Exploring the challenges and opportunities in underwriting cyber insurance in the face of evolving cyber threats and regulations

Quantitative Finance

These topic ideas span the development of asset pricing models, evaluation of machine learning algorithms, and the exploration of ethical implications among other pivotal areas.

• Developing and testing new quantitative models for asset pricing
• Analysing the effectiveness and limitations of machine learning algorithms in predicting financial market movements
• Assessing the effectiveness of various risk management techniques in quantitative finance
• Evaluating the advancements in portfolio optimisation techniques and their impact on risk-adjusted returns
• Evaluating the impact of high-frequency trading on market efficiency and stability
• Investigating the influence of algorithmic trading strategies on market efficiency and liquidity
• Examining the risk parity approach in asset allocation and its effectiveness in different market conditions
• Examining the application of machine learning and artificial intelligence in quantitative financial analysis
• Investigating the ethical implications of quantitative financial innovations
• Assessing the profitability and market impact of statistical arbitrage strategies considering different market microstructures

Treasury Management

The following topic ideas explore treasury management, focusing on modernisation through technological advancements, the impact on firm liquidity, and the intertwined relationship with corporate governance among other crucial areas.

• Analysing the impact of treasury management practices on firm liquidity and profitability
• Analysing the role of automation in enhancing operational efficiency and strategic decision-making in treasury management
• Evaluating the effectiveness of various cash management strategies in multinational corporations
• Investigating the potential of blockchain technology in streamlining treasury operations and enhancing transparency
• Examining the role of treasury management in mitigating financial risks
• Evaluating the accuracy and effectiveness of various cash flow forecasting techniques employed in treasury management
• Assessing the impact of technological advancements on treasury management operations
• Examining the effectiveness of different foreign exchange risk management strategies employed by treasury managers in multinational corporations
• Assessing the impact of regulatory compliance requirements on the operational and strategic aspects of treasury management
• Investigating the relationship between treasury management and corporate governance

Financial Technology (FinTech)

The following research topic ideas explore the transformative potential of blockchain, the rise of open banking, and the burgeoning landscape of peer-to-peer lending among other focal areas.

• Evaluating the impact of blockchain technology on financial services
• Investigating the implications of open banking on consumer data privacy and financial services competition
• Assessing the role of FinTech in financial inclusion in emerging markets
• Analysing the role of peer-to-peer lending platforms in promoting financial inclusion and their impact on traditional banking systems
• Examining the cybersecurity challenges faced by FinTech firms and the regulatory measures to ensure data protection and financial stability
• Examining the regulatory challenges and opportunities in the FinTech ecosystem
• Assessing the impact of artificial intelligence on the delivery of financial services, customer experience, and operational efficiency within FinTech firms
• Analysing the adoption and impact of cryptocurrencies on traditional financial systems
• Investigating the determinants of success for FinTech startups

Commercial Banking

These topic ideas span commercial banking, encompassing digital transformation, support for small and medium-sized enterprises (SMEs), and the evolving regulatory and competitive landscape among other key themes.

• Assessing the impact of digital transformation on commercial banking services and competitiveness
• Analysing the impact of digital transformation on customer experience and operational efficiency in commercial banking
• Evaluating the role of commercial banks in supporting small and medium-sized enterprises (SMEs)
• Investigating the effectiveness of credit risk management practices and their impact on bank profitability and financial stability
• Examining the relationship between commercial banking practices and financial stability
• Evaluating the implications of open banking frameworks on the competitive landscape and service innovation in commercial banking
• Assessing how regulatory changes affect lending practices and risk appetite of commercial banks
• Examining how commercial banks are adapting their strategies in response to competition from FinTech firms and changing consumer preferences
• Analysing the impact of regulatory compliance on commercial banking operations
• Investigating the determinants of customer satisfaction and loyalty in commercial banking

International Finance

The folowing research topic ideas are centred around international finance and global economic dynamics, delving into aspects like exchange rate fluctuations, international financial regulations, and the role of international financial institutions among other pivotal areas.

• Analysing the determinants of exchange rate fluctuations and their impact on international trade
• Analysing the influence of global trade agreements on international financial flows and foreign direct investments
• Evaluating the effectiveness of international portfolio diversification strategies in mitigating risks and enhancing returns
• Evaluating the role of international financial institutions in global financial stability
• Investigating the role and implications of offshore financial centres on international financial stability and regulatory harmonisation
• Examining the impact of global financial crises on emerging market economies
• Examining the challenges and regulatory frameworks associated with cross-border banking operations
• Assessing the effectiveness of international financial regulations
• Investigating the challenges and opportunities of cross-border mergers and acquisitions

Choosing A Research Topic

These finance-related research topic ideas are starting points to guide your thinking. They are intentionally very broad and open-ended. By engaging with the currently literature in your field of interest, you’ll be able to narrow down your focus to a specific research gap .

When choosing a topic , you’ll need to take into account its originality, relevance, feasibility, and the resources you have at your disposal. Make sure to align your interest and expertise in the subject with your university program’s specific requirements. Always consult your academic advisor to ensure that your chosen topic not only meets the academic criteria but also provides a valuable contribution to the field. 

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thank you for suggest those topic, I want to ask you about the subjects related to the fintech, can i measure it and how?

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Indian Economy

Make Your Note

Banking Sector: Opportunities and Challenges

• 01 Jan 2024
• 15 min read
• GS Paper - 3
• Banking Sector & NBFCs
• Growth & Development
• Monetary Policy

This editorial is based on “Banks are fine, but there are risks” which was published in The Hindu Business Line on 029/12/2023. The article points out that State finances, an overheated stock market, and inter-connected lending are concerns, even as banks are undeniably in good health. 

For Prelims: Banking Sector , Reserve Bank of India , Non-Performing assets , Prompt Corrective Actions . 

For Mains: Challenges in the Banking Sector 

In recent times, there has been a noticeable resurgence in India's banking system following almost a decade of grappling with escalating bad loan challenges. Thanks to the concerted efforts of policymakers and the proactive measures taken by banks, the sector is currently on a more secure footing.  

Nevertheless, considering historical patterns, the positive trajectory for Indian banks remains susceptible to the impact of monetary policies and external uncertainties, such as geopolitical risks. 

How have Indian Banks Evolved over the Years? 

• In the period before Independence (up to 1947), the Swadeshi Movement led to the establishment of numerous small, local banks, most of which faced failure primarily due to internal frauds, interconnected lending, and the amalgamation of trading and banking activities.  
• Indian banks enabled the consolidation of resources, mobilised through retail deposits, towards a limited number of business families or groups, consequently overlooking the flow of credit to the agriculture sector. 
• The government successfully severed the link between industry and banks by nationalising 20 major private banks in two phases (1969 and 1980) and introducing priority sector lending in 1972.  
• These measures led to a transition from 'class banking' to 'mass banking' and had a favourable effect on the widespread expansion of branch networks in rural India, substantial mobilisation of public deposits, and increased credit flow to agriculture and allied sectors. 
• During this period, significant reforms were implemented, including the issuance of new licences to private and foreign banks to introduce competition, improve productivity, and enhance efficiency.  
• These changes involved leveraging technology, introducing prudential norms, offering operational flexibility with functional autonomy, prioritising the implementation of best corporate governance practices, and fortifying the capital base in accordance with Basel norms .  
• From 2014 onward, the banking sector has embraced the JAM (Jan-Dhan, Aadhaar, and Mobile) trinity, and granted licences to Payments Banks and Small Finance Banks (SFBs) to attain last-mile connectivity in the pursuit of financial inclusion. 

What is the Current Status of the Indian Banking Regime? 

• Not too long ago, Indian lenders faced a dire situation with bad loans, leading to a spike in stressed assets. Government-owned banks were particularly affected, with gross NPAs reaching 14.6%.  
• To counter these challenges, the government and RBI implemented a 4R strategy— Recognize NPAs transparently, Resolution and recovery, Recapitalization of PSBs, and Reforms in the financial ecosystem.  
• After grappling with seething government and bad loan issues for nearly a decade, the Indian banking system has experienced a remarkable turnaround in 2023. 
• In FY23, the gross NPA ratio for banks in India plummeted to 4.41%, the lowest since March 2015. Cumulatively, PSBs crossed the Rs 1 lakh crore-mark in profit.  
• As per RBI's Financial Stability Report , the capital-to-risk-weighted assets ratio (CRAR) stands at a robust 16.8%, indicating a strong financial position for scheduled commercial banks.  
• This underscores the sound financial health of Indian banks, reflecting positively on their ability to absorb potential risks and maintain stability in the financial system. 
• Reforms introduced over the past eight years focused on credit discipline, responsible lending, improved governance , and the adoption of technology. Mergers of PSBs were instrumental in reducing NPAs. 
• Banks exhibit strong liquidity levels , measured by funds available for lending. Despite the RBI’s recent monetary stance of "withdrawal of accommodation," banks maintain a Liquidity Coverage Ratio at least 20% higher than the minimum requirement.  
• Additionally, major banks, including SBI, PNB, and Union Bank, demonstrate a capacity to lend "higher for longer," with Credit-Deposit ratios below 72%. 

What Obstacles Lie Ahead for the Indian Banking Sector? 

• Bank lending for upcoming infrastructure and capital investments, particularly those linked to State government entities, poses a risk of defaults due to stretched State finances.  
• Banks are advised to set internal exposure limits based on fiscal/financial assessments of individual States. 
• The seemingly runaway stock market , creating an illusion of wealth, presents a risk to retail exposures. Increased demat accounts and high PE ratios across sectors are indicators of this risk. 
• Integrated supervision and rigorous stress tests on retail portfolios are recommended to address this emerging risk. 
• The possibility of default becoming a contagion due to interconnected lending and lax governance norms poses a significant challenge.  
• Focused risk monitoring is necessary, emphasising that regulation cannot substitute for good governance. 
• The re-globalization of the world and geopolitical shifts may challenge  Small and medium-sized enterprises(SMEs), especially in the face of Free Trade Agreements (FTAs) and regional ambitions.  
• Banks need to carefully assess and prepare for potential risks to SMEs, considering potential disruptions to cash flows. 
• The character of liabilities is changing with digitisation and evolving consumption trends, impacting retail deposits. Banks with higher credit-deposit ratios may face challenges in liquidity coverage.  
• A structural shift in Indian savings requires caution and prudence from bankers, necessitating a careful watch amidst favourable conditions. 

How Can the Indian Banking Sector be Fortified Moving Ahead? 

• The second tier could include numerous mid-sized banks, including niche institutions, with a widespread presence across the economy.  
• Consistent with these suggestions, the government has already consolidated certain PSBs and taken measures to establish entities like a Development Finance Institution (DFI) and a Bad Bank. 
• Essentially, these specialised banks would facilitate financial access in specific areas such as retail, agriculture, and MSMEs.  
• Additionally, establishing proposed DFIs or niche banks as specialised entities would provide them with access to low-cost public deposits and enable improved asset-liability management. 
• Enhanced risk management can be achieved, and neo-banks have the opportunity to harness this technology for advancing digital financial inclusion and supporting the increased growth of an aspiring and emerging India. 
• In the realm of Indian banking, the implementation of technologies such as Blockchain holds the potential to facilitate prudential supervision, making oversight and control over banks more streamlined. 
• Until now, the occurrence of public sector banks failing has been infrequent, primarily due to the concealed sovereign guarantee, instilling greater trust in the public. Nevertheless, the ongoing privatisation of PSBs challenges this assurance.  
• Consequently, the upcoming wave of banking reforms should emphasise the necessity for increased individual deposit insurance and efficient orderly resolution mechanisms. This aims to reduce moral hazard and systemic risks, minimising the financial burden on the public treasury. 
• It could be beneficial for Distinctive Banks to consider listing on a reputable stock exchange and embracing the ESG (Environmental, Social Responsibility, and Governance) framework. This approach aims to enhance value for stakeholders over the long term. 
• To address vulnerabilities, the government should refine regulatory measures, enabling banks to develop diversified loan portfolios , instituting regulators for specific sectors, and granting increased authority to handle deliberate defaults effectively. 
• In order to establish a responsive banking system in a dynamic real economy, there is a requirement to promote the growth of the corporate bond market, thereby transitioning away from a bank-centric economic model. 
• Develop and implement internal risk models tailored to individual States, similar to the Bank Exposure Risk Index , to assess potential risks associated with lending to State government entities and infrastructure projects. 
• Recognize the changing nature of liabilities influenced by digitisation and evolving consumption trends. Develop strategies to adapt to shifts in retail deposits, especially in Tier 1 and 2 centres. 

Conclusion  

While celebrating the current success of the banking sector, it is crucial to adopt a proactive and vigilant stance to navigate the complexities and uncertainties of the times we live in. 

UPSC Civil Services Examination, Previous Year Question (PYQ) 

Prelims .

Q1. With reference to the Banks Board Bureau (BBB), which of the following statements are correct? (2022) 

• The Governor of RBI is the Chairman of BBB. 
• BBB recommends for the selection of heads for Public Sector Banks. 
• BBB helps the Public Sector Banks in developing strategies and capital raising plans.  

Select the correct answer using the code given below: 

(a) 1 and 2 only    (b) 2 and 3 only  (c) 1 and 3 only    (d) 1, 2 and 3 

Ans: B 

Q2. Consider the following events: (2018) 

• The first democratically elected communist party government formed in a State in India. 
• India’s then largest bank, ‘Imperial Bank of India’, was renamed ‘State Bank of India’. 
• Air India was nationalised and became the national carrier. 
• Goa became a part of independent India. 

Which of the following is the correct chronological sequence of the above events? 

(a) 4 – 1 – 2 – 3    (b) 3 – 2 – 1 – 4  (c) 4 – 2 – 1 – 3    (d) 3 – 1 – 2 – 4 

Mains 

Q. Pradhan Mantri Jan Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional finance fold. Do you agree with this for the financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion. (2016)

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196 Banking Essay Topics

🏆 best essay topics on banking, ✍️ banking essay topics for college, 👍 good banking research topics & essay examples, 🌶️ hot banking ideas to write about, 🎓 most interesting banking research titles, 💡 simple banking essay ideas, ❓ banking essay questions.

• Bank Street Curriculum: Implementation and Assessment
• Online Banking Fraud Risk Awareness
• Information Systems Evolution in the Banking Industry
• The Bank Robbery Crime Investigation
• Information Technology and Banking Sector
• The Impact of the Internet on Banking
• Risk Management Strategies of Bank of America
• Banking and Inventory Management This assessment analyses the inventory management as a tool for achieving successful supply chains and resilience in the banking services industry.
• Barclays Bank’s Strategic Analysis Barclays Bank is among the largest financial services. The paper analyzes the bank’s external business environment, financial position, and recommendations.
• DBS Bank’s Digital Transformation Strategy DBS is now one of the best banks to use in Asia. This study will analyze the strategies used and their effectiveness in digitizing the bank.
• Standard Chartered Bank Managing Human Resources This report is a case study on Standard Chartered, and the strength-based approach in the bank has been discussed with its benefits and also disadvantages.
• Bank Reconciliation: Theft and Control Deficiencies Internal control is a vital process because it gives reasonable assurance about the activities of a company and compliance with laws and regulations.
• The Structure and Functions of the World Bank The paper highlights the structure and functions of the World Bank and the United Nations in the global arena. It centered on the reasons behind the formation.
• Banking Merger, Its Benefits and Consequences The paper seeks to discuss the effects of mergers in the banking industry on the public especially in the United Kingdom.
• Leadership and Management in the Banking Sector The paper discusses leadership and management in the banking sector and the role of a leader, his approaches to managing processes, and his values.
• Punjab National Bank Housing Finance Company: Case Analysis Punjab Nation Bank Housing Finance Limited has experienced stagnant growth since its incorporation with other partners in 1988.
• Managing Employees Performance at HSBC Private Bank and Theoretical Analysis of Performance For a better understanding of Managing Employee Performance this paper would go for HSBC, the UK as a case study and then go for theoretical analysis.
• Financial Regulation by the IMF and the World Bank The International Monetary Fund and the World Bank use several instruments to regulate the balance of payments problems and other financial crisis that countries might have faced.
• HSBC Bank Balance Sheet Analysis Financial accounts have different users; each user has specific needs they require from the accounts. Financial account users can be defined into two main segments.
• Bank of Credit and Commerce International Case When the branch offices of the Bank of Credit and Commerce International (BCCI) in seven countries were raided in early July 1991, one of the major bank scams involving billions of dollars was brought to light.
• Banking, Its Ancient and Modern History The history of banking dates back to Ancient Greece and the Roman Empire. The first prototypes were created by merchants around 2000 BC in Assyria and Sumeria.
• The Goals of a Banking Institution The management should ensure that effective structures are in place to align the firm’s resource so that the aims and objectives are met.
• Barclays Bank’s Talent Management The Barclays Bank in Stanford has successfully organised its human resource management approach to internalise the aspects of employee equity.
• Barclays Bank’s Decision-Making & Risk Management Barclays Bank has a clear and progressive vision of the decision-making process, with risk management being the most elaborate one.
• Time Management for Students in Bahrain’s Banking This research is aimed to study the opinions and attitudes towards time management among the students at Bahrain University and the country’s financial sector.
• National Australia Bank: Corporate Social Responsibility This paper explores corporate social responsibility through an analysis of a company selected from the database of the world’s most ethical companies.
• Starling Bank’s Environment and Resource Analysis Starling Bank turned out to be a promising financial institution that appeared on the market, correctly assessing the main trends and joining them.
• Investment Opportunity Analysis: British Banking Sector The Big Four British banks dominate the UK banking industry for a number of reasons, including their longevity, aggressive marketing, and service variety.
• Corporate Social Responsibility in Bangladesh’s Banking Sector CSR practices by banks in Bangladesh not only enhance their accountability but also boost their success and influence the socially responsible behaviors of other firms.
• Analyzing Bank Performance: Risk Propositions This report points out some of the challenging circumstances that the banks and financial institutions may find themselves in if the crisis goes out of hand.
• Fraud Perpetrators in Banking Organizations Most of the fraud perpetrators are insiders. This is common among the lowly paid employees who have the feeling that their employers are paying them too less.
• Co-operative Banking Group’s Enterprise Software The report illustrates how implementation of ERP system in Co-operative banking group will help in improving the firm’s accounting, inventory as well as logistics practices.
• Finance: The Currency School-Banking School Debate The period of the 1840s in the history of the economic thought is characterized by a significant controversy observed between the Currency School and Banking School.
• The Impact of the COVID-19 Pandemic on the Standard Chartered Bank This paper will explore the impact that the COVID-19 pandemic had on the Standard Chartered bank, the development of technology, and its influence on human resource management.
• Bank’s Digital Trends, Opportunities, and Threats The essay demonstrates the most crucial digital opportunities and threats for a commercial bank. The strategies to reduce the number of abandoned baskets are discussed.
• The Toronto-Dominion Bank in the Industry The Toronto-Dominion Bank measures its effectiveness using a personnel engagement score, optional labor turnover, and industry comparison.
• Mergers and Acquisitions in the Banking Sector This paper discusses mergers in the banking sector, reasons for a wave of mergers between banks, and difficulties that acquiring banks may face in the future.
• National Bank of Bahrain Analysis This report attempts to analyze the characteristics that determine the attractiveness of the NBB to investors, namely its financial structure and corporate governance framework.
• Mobile Banking Development and Analysis Project This research will be discussing the application of a mobile banking application, its effects, and its benefits to the consumers.
• Sustainable Solutions for the Bank of America Tower The following paper analyzes the current constraints present on the bank based on the building usage, the existing construction, the site, and the location.
• Benefits and the Challenges of Financial Restructuring for Bank Muscat – Oman Bank Muscat is a fiscal services company in Oman that offers retail banking, corporate banking, treasury, investment banking, asset management, and private banking.
• HSBC Bank and Barclays Bank: Comparison and Risk Exposures This paper focuses on the evaluation of the financial performance of HSBC bank and Barclays bank since the start of the global financial crisis.
• Change in Composition of Bank Funding Since 2008 The main components of bank funding are deposits, short-term debts, and long-term debts. Over 50% of bank funding originates from retail deposits.
• Analysis of Islamic Banking and Finance The purpose of this article is to consider the features of Islamic banking, as well as the principles on which the relationship between the bank and customers is built.
• DuPont Analysis of the Chinese Bank of Communications The present report aims at applying DuPont analysis to evaluate the performance of the Chinese Bank of Communications (BoCom) against its competitor, China Merchants Bank (CMB).
• Bank Management and Business Report Analysis This report is prepared in the interest of a bank that is planning to increase their sales performance, with the aim to provide an opinion on how sales should be improved.
• Waiting Lines Situation at Banking Organizations Hiring more personnel could be a solution to address the challenge of long queues at many facilities.
• Barclays Bank’s Innovative Managerial Practices One of the most vivid examples of Barclays’s encouragement of entrepreneurship processes is the LifeSkills program.
• International Monetary Fund, World Bank, and World Trade Organization This paper studies three international financial organizations: the International Monetary Fund, the World Bank, and the World Trade Organization.
• Electronic Banking Services in a Qatar Bank The present research is based on the context of e-banking services in Qatar, a small country with abundant natural assets. Banks in Qatar have not been able to get the majority of customers.
• Human Rights in Israel-Gaza and West Bank Regions The conflict in the Gaza region was a violation of human rights because the sovereignty of the state was not respected by foreign powers.
• Credit Quality in Banking Lending and Investment This paper analyses the credit quality problems of banking institutions’ lending and investment decisions over the last 30 years.
• US Banking Expansion in Emerging Markets U.S. banking has contributed significantly to the development of financial markets of emerging countries such as China, Malaysia, Brazil, and others.
• Bank of Japan’s Unconventional Monetary Policy In Japan, the supply of money is mainly controlled by the Bank of Japan with the help of monetary policy that is focused on inflation and interest rates.
• Affective and Cognitive Factors That Hinder Banking Relationships The paper presents a comprehensive view and discussion of the influence of cognitive and psychological factors on financial decision-making.
• Evolution of Modern Banking: Middle Ages to Present The history of banking began around 2000 BCE in Assyria, Sumeria, and India when wealthy families kept gold and silver coins in their homes.
• The Bain & Co. and the Old Family Bank Analysis This paper aims at a holistic and comprehensive analysis of Bain & Co. and the Old Family Bank from the point of view of internal and external aspects.
• The Central Bank Currency in the Monetary System The article examines the central bank currency in the monetary system. The people’s need to have control over money is the reason for the need for the central bank currency.
• World Bank’s Contribution to Sustainable Development Goals The essay examines the role of the World Bank in bolstering the Sustainable Development Goals measures to combat poverty and promote development.
• Key Learnings for Banking Sector During COVID-19 The changing nature of the modern business environment requires considering organizational development (OD) practices.
• Information Gain in the Banking Sphere Information gain can be determined as a methodology that can be practically applied to the digitalization of payments in the banking sphere.
• Customer Analysis via Entropy and Information Gain in Banking The introduction of big data analytics in the financial sector has provided bankers with countless opportunities to improve the quality of their services.
• CNP Bank Card: Case Analysis This paper focuses on the CNP bank card case, which aims to create a method for forecasting credit-card defaults and identifying potential client bases for various credit instruments.
• The Basel III Agreement in Banking The paper discusses Basel III. It is a global regulatory agreement that mandates banks to maintain particular leverage ratios and reserve capital levels.
• Information Gain and Entropy Methods in Banking The paper reviews the methods of information gain and entropy used by banking companies and critically analyzes some alternatives that are possible to use.
• Moroccan Central Bank’s Ethics and Systems The banking sector in the last two years has been impacted greatly by the COVID-19 pandemic. The situation led to the emergence of various innovations.
• A Bank, a Grocery Store, and a Restaurant: The Cultural Features This paper analyzes the available cultural features of a bank, a grocery store, and a restaurant to determine the distinctive features of these public places.
• America’s Banking Industry: Past, Present, and Future Banks are critical to the economic stability of a country. Banks are the primary option for borrowing, saving, and investing for millions of Americans in the United States.
• People Analytics of the Qatar National Bank One of the biggest challenges in conducting people analytics research for the Qatar National Bank is working with unstructured data.
• Developing the Islamic Banking Cluster in the UAE The report’s mission is to develop the Islamic banking cluster in the UAE in order to be number one in Islamic Banking.
• TD Canada Trust Bank’s Performance Management The performance management system implemented in the TD Canada Trust Bank corresponds to the international financial sector management standards.
• The National Banking Crisis Analysis The recent crisis at a national bank has attracted nationwide coverage due to its massive effect on the economy.
• Qatar National Bank’s General Information Bank groups that have already developed the most efficient business models and managed to expand their operations globally are in a comfortable position.
• Banking in the United States of America The banking system of the United States of America is one of the youngest, and banking has its own specifics with a lot of restrictions and even archaic elements.
• The Community Reinvestment Act and the Banking Systems This paper aims to study the impact of the Community Reinvestment Act (CRA) on banking in communities of Arkansas, California, and Boston.
• Islamic Banking and Its Development Problems Islamic banking’s main purpose is to perform the function of making payments and working with a considerable amount of money.
• JPMorgan Chase Bank and Big Data The purpose of this paper is to analyze big data as technology concerning JPMorgan Chase and consider how it can be used shortly by this company.
• AMZ Bank’s Main Problems and Their Solution As a result of the analysis of the AMZ bank and its activities, it was found that the main problem is a toxic culture and the resulting social and economic structure.
• Banking: A Balance Sheet and an Income Statement The paper indicates that when compared to a balance sheet, an income statement presents a less defined and incomplete type of analysis.
• Wells Fargo Bank Scandal in Southern California The scandal in Wells Fargo Bank emerged after the customers started receiving the cards in their mail and others noticed accumulating bank fees.
• An Overview of Risks in Banking and Investments Credit ratings serve as vital tools for the investor, especially when they need a precise analysis of the organization’s position at a glance.
• Green Initiatives of the Toronto-Dominion Bank The paper will assess the actions taken by Toronto-Dominion Bank in order to reduce its impact on the environment.
• Organizational and National Culture in Banking The most important feature of commercial bank management is the continuous search for a productive compromise between the organizational and the national cultures.
• Current Dynamics and Trends in Corporate Banking Sustainable financing is one of the emerging trends in corporate banking due to the consequences of the COVID-19 pandemic.
• Island Banking Services: Cybersecurity Strategy and Implementation Plan This paper aims to describe the cybersecurity strategy and its implementation plan for Island Banking Services that is a firm that works in Financial Transactions Processing.
• Banking Regulations Undermining Financial Crisis Traces of financial crisis and negative externalities have been present across the banking sector for the last several decades.
• Bank of America and Financial Analysis Bank of America is a leading US financial institution. An analysis of the Strengths, Weaknesses, Opportunities, and Threats (SWOT) is essential when planning the Bank’s future.
• Analysis of Abu Dhabi Commercial Bank Abu Dhabi Commercial Bank is a full-service commercial bank that provides a broad range of products and services, for instance, retail banking, management of wealth and others.
• Impact of Bank Regulation, Market Structure, and Institutions on Cost of Financial Intermediation Through the process of intermediation, the financial institutions are able to ensure that there is an effective flow of funds.
• Banks and Banking in Spain The Spanish legal framework has transformed banking and insurance services due to the creation of the EU single market.
• Hull vs. Bank Case Study This case reflects the issue that occurred between the property tenants and the North Adams Hoosac Savings Bank. Harry transferred his interests in East Quincy and to his wife.
• Competition in Islamic Banking Systems The main purpose of the research will be to investigate the effect of competition on profitability and the market power in the Islamic banking system.
• The Effect of Finance as It Relates to Banking in Our Society The purpose of this paper is to analyze the effects of finance as it relates to banking in the Cayman Islands.
• Bank of Credit and Commerce International’s Criminal Activity This case provides adequate information on how BCCI bank was involved in a global financial crime of laundering billions of dollars globally.
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• Opening a Bank Office in Lithuania This paper will discuss the viability of opening a bank office in Lithuania. Opening a new office usually involves many risks, especially if the new area is not researched properly.
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• Information Age, Future, and Medical Banking Medical banking organized following the concept of patient-centered care can facilitate the shift from logical considerations to the particular needs of patients.
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• The Crisis in UK Banking of 2007-2008 The combination of major economic shocks and the unprecedented global policy response to the banking crisis has generated exceptional uncertainties for household,
• Wachovia Bank Financial Report Wachovia bank, which is now a part of Wells Fargo bank, was regarded as the fourth-largest bank holding company in the USA, the financial system of which was based on total assets.
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• The Grew of Financial World Crisis: Global Central Bank As Michael Mandel writes in his article, the financial world crisis flows out of the absence of a global central bank, which could have regulated the world financial movements.
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• Bank of America Launching New Online Services Bank of America successfully tested its new mobile banking service on a small-scale basis to determine the acceptability level among customers.
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• Macroeconomics Interest Rates and Aggregated Supply: Demand in the Federal Reserve Bank The Federal Reserve Bank makes a decision to increase interest rates regardless of the fact that real wages do not rise.
• Vision Bank’s Intercultural Communication: Problems and Recommendations The selected company for this report is Vision Bank. It provides banking, loans, financial advice, and consultancy services to customers in different regions.
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• The Lehman Brothers Bank Collapse The main purpose of this study is to examine the financial crisis of 2008-2010 on public discourse with regard to the collapse of Lehman Brothers.
• Goldman Sachs Group in Investment Banking Industry Goldman Sachs Group has had a long history in the context of the global economy and, therefore, has gained impressive experience over the years of its operations.
• Hedging Strategy and Bank Risk Management Strategy for risk management is an essential step for banks. Hedging is a tool managing the financial risks that may emerge in the process of managing forwards and futures.
• Bank of America’s E-Business Challenges The promoters of the Bank of America have not conceded on the matter of going e-business. This problem has a direct relation to the size and financial ability.
• The Asian Infrastructure Investment Bank’s Initiative The purpose of this paper is to discuss the implications of the Asian Infrastructure Investment Bank’s initiative and analyze three global connections with regard to the project.
• HSBC Bank’s Staffing Change: Communication Plan This work shows the communication plan for the change in staffing at HSBC Bank, identifies its key trends, assumptions, and risks, and gives a SWOTT analysis of the organization.
• State Bank’s and Real Estate Bank’s Collapse Today, the collapse of state banks is the problematic situation which is often associated with significant economic and political problems in the country.
• The Rise of Islamic Banking in a Time of Economic Crisis On the surface, it may seem odd that Islamic banking is in such demand but when looked at from a cultural and religious perspective, it embodies the very essence of Islamic law.
• Barclays Bank’s Decision-Making and Leadership Barclays Bank Board comes up with the vision for the bank. It could be the expansion plans into the Middle East or the African continent.
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• Corporate Governance in the Banking Industry Work utilizes the stakeholder theories and the stewardship presumption to shows how corporate governance contributes to higher standards of accountability in the banking industry.
• Commercial Bank’s Profitability in Austria The analysis done in this paper shows that there is a close relationship between gross domestic product and commercial banks’ profitability in Austria.
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• Foreign Investment in Chinese Banking Sector: HR Policies China`s banking system and foreign investment policies have to survive numerous changes and improvements using its norms and guidelines in comparison to developing countries.
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• Does Banking Regulation Cause Counterproductive Economic Dynamics?
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• How Does Banking Market Power Affect Bank Opacity?
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• Are Banking Systems Increasingly Fragile?
• How Does Banking Sector Globalization Affect the Banking Crisis?
• Can Sustainable Banking Help Stimulate Economic Growth in Sub-Sahara Africa?
• Are Labor-Saving Technologies Lowering Employment in the Banking Industry?
• How Does Competition Affect Efficiency and Soundness in Banking?
• Can Central Banking Survive the IT Revolution?
• Are More Competitive Banking Systems More Stable?
• Does Banking Consolidation Lead to Efficiency Gains?
• Are Recoveries From Banking and Financial Crises Really So Different?
• What Determines the Banking Sector Performance in Globalized Financial Markets?
• Can the Chinese Banking System Continue to Grow Without Sacrificing Loan Quality?
• Are Systemic Banking Crises in Developed and Developing Countries Predictable?
• What Drives Banking Sector Fragility in the Eurozone?
• Can Islamic Banking Increase Financial Inclusion?
• Does Banking Sector Development Affect Economic Growth and Inflation?
• What Are the Customer Perceptions Towards Banking Industry Marketing?

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StudyCorgi. (2021, September 9). 196 Banking Essay Topics. https://studycorgi.com/ideas/banking-essay-topics/

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This essay topic collection was updated on June 20, 2024 .

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Peer-to-peer lending platforms under pressure following RBI’s guidelines

Recently, the Reserve Bank of India (the “ RBI ”) introduced new comprehensive guidelines for peer-to-peer (“ P2P ”) lending platforms (the “ Guidelines ”) in the Master Direction – Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 (the “ Master Directions ”). The Guidelines aim to enhance transparency, safeguard lender and borrower interests, and streamline operations for the sector as a whole.

Non-Banking Financial Company P2P lending platforms (“ NBFC-P2P ”) serve as a marketplace for individuals to borrow or grant short-term loans and offer an alternative to traditional bank lending. They provide various loan options, including secured and unsecured loans, and are often used by individuals with a poor credit score or businesses that need immediate financing. The Master Directions aimed to regulate the industry, imposing restrictions to protect lenders and borrowers. Prohibited practices included offering credit guarantees and cross-selling non-loan-specific insurance products. Platforms were required to implement a board-approved policy to match lenders with borrowers, enforce strict fund transfer protocols through escrow accounts, and limit fund retention to T+1 days where ‘T’ is the ninth day on which the funds are received in these escrow accounts. The Master Directions also barred the promotion of P2P lending as an investment product and allowed outsourcing, excluding core management functions. The RBI has now, issued the Guidelines to address and rectify observed violations by NBFC-P2P lending platforms.

Key amendments

• Credit risks and funds deployment : NBFC-P2P lending platforms cannot assume any credit risk, and the responsibility of principal or interest loss falls solely on lenders. These platforms are now required to disclose to lenders that the lenders have to bear all credit risks. NBFC-P2P platforms must also ensure the strict deployment of funds as per the Guidelines, including that, one lender’s funds should not be used for another’s purposes.
• Ban on sale of insurance products : Following the ban on default loss guarantee agreements in September 2022, the sale of insurance products that provide credit enhancement or credit guarantees is now prohibited.
• Pricing policies : NBFC-P2P platforms are now mandated to adopt a clear and objective approach, and must ensure that fees are disclosed at the time of lending. Importantly, fees must remain fixed and not be affected by the borrower’s ability to repay. Additionally, the Guidelines restrict NBFC-P2P platforms from sourcing borrowers and lenders through affiliates or closed user groups, thereby emphasizing transparency and fairness.
• Lender’s aggregate exposure cap : NBFC-P2P platforms are now required to cap the aggregate exposure of a lender to all borrowers across all NBFC-P2P platforms at INR 5 Million (~US$60,000). Moreover, if a lender’s exposure exceeds INR 1 Million (~US$11,920) across multiple platforms, the lender must obtain a certificate from a chartered accountant to prove a minimum net worth of INR 5 Million (~US$60,000).
• Fund transfer through escrow account : The Guidelines mandate that funds managed through escrow accounts on NBFC-P2P platforms must be transferred within one (1) business day (T+1) of receipt. Previously, the lack of a strict timeline for fund transfers led to potential delays and inefficiencies. This change aims to ensure efficient fund transfers, benefiting lenders with quicker access to their funds and borrowers with faster loan disbursements, which is particularly important in urgent financial situations.
• Manual borrower selection process : Lenders are now required to manually select borrowers, shifting away from the previous reliance on algorithms for portfolio diversification. This change from using artificial intelligence ( “AI” ) and machine learning to manually approved matching has disrupted the P2P lending industry, with many NBFC-P2P platforms pausing operations to comply.
• No guarantees : NBFC-P2P platforms are now prohibited from providing any guarantees on loan recovery or marketing P2P lending as an investment product with features like assured returns or liquidity options. This aligns with the RBI’s actions in 2023 when various NBFC-P2P platforms were asked to halt certain activities after RBI inspections found rule violations and misleading sales practices.
• Prominent RBI recognition : NBFC-P2P platforms must prominently display a caveat on their websites and promotional materials, including a disclaimer stating that although the platform is registered with the RBI, the RBI does not guarantee the accuracy of statements or the repayment of loans.
• Restrictions on cross-selling of products : The Guidelines restrict NBFC-P2P entities from cross-selling products, except loan-specific insurance products. This change aims to reduce conflicts of interest and prevent platforms from pressuring borrowers into purchasing unnecessary add-ons. Previously, some platforms offered credit enhancement products and loan protection insurance, which could mislead lenders and increase borrowers’ financial burden. The RBI’s restrictions ensure that P2P platforms focus on their primary function of facilitating loans without burdening borrowers with additional products.
• Public disclosures : Transparency and disclosure are key regulatory requirements. NBFC-P2P platforms must record and maintain detailed borrower information, including personal identity, interest rates, and credit scores. Further, they must publicly disclose portfolio performance, including non-performing assets and losses borne by lenders, on their websites. They must also clearly display their brand name across all customer interfaces and communications to ensure legitimacy.
• Grievance handling and outsourcing : Compliance with the Reserve Bank – Integrated Ombudsman Scheme, 2021 ( the “RBIOS, 2021” ) is mandatory, with NBFC-P2P platforms required to facilitate grievance handling by allowing customers to file complaints with the RBI. Regarding outsourcing, NBFC-P2P platforms are prohibited from outsourcing core management functions, such as internal audit, strategic and compliance functions, and the pricing of services. However, internal audit functions may be outsourced within a group or conglomerate, provided the overall integrity of management is maintained.

The introduction of the Guidelines for NBFC-P2P lending platforms marks a significant step towards enhancing the sector’s transparency and operational efficiency. By banning the promotion of P2P loans as investment products and implementing stringent operational controls, the RBI aims to protect both lenders and borrowers, streamline fund management, and foster a fair lending environment.

Lenders are now fully responsible for the risk they assume and need to be more diligent in borrower selection, while also adhering to stricter financial requirements. Borrowers may benefit from clearer loan agreements, and they will see fewer bundled financial products. The role of trustees and banks to ensure smooth fund transfers has increased.

However, the shift to manual borrower selection has introduced significant challenges for the NBFC-P2P lending industry. Previously, advanced AI and machine learning technologies allowed NBFC-P2P platforms to efficiently match lenders with borrowers, thereby spreading investments across numerous loans and mitigating risk. The new requirement for manual selection and individual approval for each loan recipient restricts this diversification and potentially increases the exposure and risk for lenders. This move has caused considerable disruption in the industry, forcing many platforms to pause their operations as they adapt to the Guidelines.

The RBI’s move towards clear pricing policies and restricting cross-selling practices is to ensure that NBFC-P2P platforms remain true to their core function of facilitating loans without burdening borrowers with unnecessary financial products. These measures, coupled with the emphasis on grievance handling and compliance with the RBIOS, 2021, signal an introduction of a robust framework to protect consumer rights and maintain trust in the NBFC-P2P lending ecosystem.

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Companies bought over by the Adani Group got ‘haircut’ of 96% to 42% on loans from public sector banks: Congress

Banks that had claims of ₹62,000 crore from 10 financially stressed companies had been made to settle for just ₹16,000 crore, congress leader jairam ramesh alleged.

Updated - September 04, 2024 09:10 pm IST - New Delhi

Congress MP Jairam Ramesh. | Photo Credit: PTI

The Congress on Wednesday (September 4, 2024) claimed data revealed by the All India Bank Employees Association (AIBEA) shows that public sector banks took a 74% “hair cut” on their outstanding dues in 10 financially stressed companies after they were bought over by the Adani Group.

Congress general secretary Jairam Ramesh said that AIBEA data showed banks that had claims of ₹62,000 crore from 10 companies under financial stress were made to settle their loans for just ₹16,000 crore after the Adani Group took over these companies.

“The All India Bank Employees Association has revealed, through publicly available data, how public sector banks that had claims of about ₹62,000 crore from 10 financially stressed companies have been made to settle for just ₹16,000 crore after the non-biological PM’s favourite business group took over these 10 companies,” Mr. Ramesh posted on social media platform X.

“In the colourful language of finance, this is a 74% ‘haircut’ taken by the banks,” he added.

The Congress leader also shared a screenshot of details, purportedly shared by the AIBEA, that showed companies that were bought over by the Adani Group got a ‘haircut’ in the range of 96% to 42%.

While the Congress has been persistent in its attack on the Adani Group in the wake of allegations made by Hindenburg Research, the Adani Group has described the charges as baseless.

Published - September 04, 2024 08:50 pm IST

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India’s domestic consumer electronics market closes in on $100-bn valuation

At close to $100 billion, the country's market size for such goods would become the third-largest, only behind China's $268 billion and America's $155 billion expected by 2024-end.

New Delhi: India's domestic market size of consumer electronics and home appliances such as smartphones, laptops, air-conditioners, and refrigerators is likely to swell to nearly $100 billion by the end of December, analysts said.

To be sure, this takes into account only devices and appliances retailed to consumers within India, and does not include heavy appliances, and ancillary electronics, whose inclusion will considerably bump up the size of the market for such goods.

The value of all consumer electronics (smartphones, PCs, smart TVs, audio products, wearables and tablets) and home appliances (kitchen appliances, air-conditioners, refrigerators and washing machines) sold to consumers in the current calendar year is expected to be $99 billion—with the likelihood of hitting $100 billion subject to a strong festive demand.

Read more: Are the growth wheels coming off in the cars segment?

In India, September to December months are grouped as the ‘festive season’, and often account for nearly half of net electronics and appliances sales for the full year.

Along with value, what’s interesting to note is India’s fast growth pace. Analysts that Mint spoke to said that the pace of growth in India’s market is expected to be around 10% this year. This is nearly double that of China, and triple that of the US’s 3.3% growth in market size this year.

Tarun Pathak, director of research at market research firm Counterpoint India, said that the rise in valuation is in line with the overall trend of the market. “The advent of affordability options and easy access to credit changed the market dynamics significantly. The slowdown in volume could be offset by brands, especially beyond smartphones such as in smart TVs, where a rising average price with discretionary features found a market among buyers thanks to easy financing schemes, as well as discount offers and promotions that are now running in India across the year, and not just in the festive season," Pathak said.

This also reflects in company financials. As per the Registrar of Companies (RoC), Samsung India reported a 16% growth in net revenue to ₹ 98,924 crore in FY23. China’s electronics conglomerate BBK Group, which operates five gadget brands in the country, maintained steady revenue at ₹ 81,870 crore in FY23 despite sales volumes falling significantly. Apple India clocked ₹ 49,321 crore in revenue in FY23.

The financials for FY24 are yet to be filed by any company.

Each of these companies is expected to report a high-single digit revenue growth in FY24, while Apple India’s growth could be exponentially higher, driven by rising iPhone sales.

Read more: Debt platforms expand loans for consumer, e-commerce firms this festive season

However, not everyone is convinced about the $100-billion market size of India’s electronics industry. Navkendar Singh, associate vice-president at market researcher IDC India, said that value-addition is not necessarily a sign of growth.

“The growth in value could be to the benefit of retailers, but it’s important to note that value growth is not a sign of market growth—or increasing value generation from the domestic market for the Centre. More premium devices being sold in India is a sign of credit proliferation and buyer sentiment, but the fact remains that there are no net new customers joining the electronics market. This gives the market a lopsided growth indicator—and doesn’t mean that India is actually becoming a market akin to China or the US," he said.

Retailers, though, are excited about the growth trends. Kailash Lakhyani, founder and chairman of industry body All India Mobile Retailers Association and vice-chairman of Confederation of All-India Traders, said that after a year of low demand, retailers are finding their footing in higher-value sales. “Retailers are indeed seeing a clear demand for higher-value, premium electronics and appliances. What helps them is ample availability of high-value units across electronics and appliances, and the consumer nature of wanting to get a physical experience of a premium device, before making a purchase. This is clearly adding value, and footfall is expected to increase starting next month on account of the festive sales," he said.

Read more: Retailers expect festive boost after high inflation, elections hurt sales

• #Consumer sector

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