Page 35 - Banking Finance May 2025

ARTICLE

IFSCA (Banking)

Regulations, 2020

and their Implications

for the Future of

Dr. Dileep Kumar S. D.
Banking Assistant Professor and Coordinator

PG Department of Commerce
PES Institute of Advanced Management Studies
Shivamogga, Karnataka

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India's financial services sector has evolved from traditional banking in the pre-colonial era to a modern,
technology-driven system. Key milestones include the establishment of the RBI, the nationalization of
banks in 1969 and 1980, and the economic liberalization of 1991, which introduced private banks and
foreign competition. Recent advancements include the Digital India initiative and the Pradhan Mantri Jan
Dhan Yojana, which have enhanced financial inclusion and digital banking. The IFSCA Act, 2019, and the
IFSCA (Banking) Regulations, 2020, aim to position India as a global financial hub by creating a conducive
regulatory environment for international banking within IFSCs, notably GIFT City.
Introduction: areas. Another wave of nationalization in 1980 included
more banks, further extending financial inclusion. The 1991
The evolution of India's financial services sector can be
traced back to traditional banking practices during the pre- economic liberalization marked a turning point, introducing
colonial era, where moneylenders and indigenous bankers significant reforms to open up the economy and promote
played a pivotal role. With British colonization, formal private sector participation.
banking began to take shape, marked by the establishment The Narasimham Committee reports recommended
of the Bank of Hindustan in 1770 and the Presidency Banks prudential norms, deregulation, and banking supervision
in the early 19th century. These developments laid the
enhancements, leading to the emergence of new private
foundation for modern banking in India. Post-independence, banks like HDFC and ICICI. This era also saw the entry of
the Reserve Bank of India (RBI) was established as the
foreign banks, increasing competition and bringing global
central bank, regulating the country's monetary and
best practices to India.
banking systems.
The 21st century has been characterized by rapid
The Banking Regulation Act of 1949 was a significant step technological advancements and regulatory enhancements.
towards formalizing banking operations. The nationalization The adoption of ATMs, internet banking, mobile banking,
of 14 major commercial banks in 1969 aimed to align and core banking solutions has revolutionized customer
banking with economic goals, promoting credit distribution experiences and operational efficiency. The Digital India
to priority sectors and expanding banking services to rural initiative further accelerated this transformation, promoting

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