Indian banking industry has recently witnessed the roll out of innovative banking models like payments and small finance banks. India’s banking sector is sufficiently capitalized and well-regulated according to the Reserve Bank of India. The financial and economic conditions in the country are far superior to any other country in the world. RBI new measures may go long way in helping the restructuring of the domestic banking industry. 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).Credit, market and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well.
The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks in addition to cooperative credit institutions. Till September 2021, the total number of ATMs in India reached 213,145 out of which 47.5% are in rural and semi urban areas, total assets in the public and private banking sectors were US$ 1,602.65 billion and US$ 878.56 billion. In FY16-FY21, bank credit increased at a CAGR of 0.29%, total credit extended surged to US$ 1,487.60 billion. Bank deposits stood at Rs.162.41 trillion (US$ 2.17 trillion) as of December 31,
2021.Credit growth is expected to hit 10% in 2022-23 as per India Ratings & Research which will be a double-digit growth in eight years.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 July 2021, Google Pay for Business has enabled small merchants to access credit through tie-up with the digital lending platform for MSMEs—FlexiLoans.As of February 21, 2022, the number of bank accounts—opened under the government’s flagship financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’—reached 44.63 crore and deposits in the Jan Dhan bank accounts totalled Rs. 1.58 trillion (US$ 21.25 billion).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 2019, banking and financial services witnessed 32 M&A (merger and acquisition) activities worth US$ 1.72 billion.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. National Asset reconstruction company (NARCL) will take over, 15 non-performing loans (NPLs) worth Rs. 50,000 crores (US$ 6.70 billion) from the banks. National Asset reconstruction company (NARCL) will take over, 15 Non performing loans (NPLs) worth Rs. 50,000 crores (US$ 6.70 billion) from the banks. 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 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. To improve infrastructure in villages, 204,000 point of sale (PoS) terminals have been sanctioned from the Financial Inclusion Fund by National Bank for Agriculture & Rural Development (NABARD).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.