Page 27 - Banking Finance June 2024

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achieving social objectives such as financial inclusion, rural like branch expansion, mobile banking, and financial literacy
development, and priority sector lending. programs. This enhances access to financial services and
promotes inclusive growth.
Facilitating Transactions:
Banks provide various services such as deposit accounts, Liberalization and Privatization:
loans, and credit facilities, facilitating the flow of funds within In the 1990s, India embarked on economic liberalization and
the economy. They enable individuals, businesses, and structural reforms, including financial sector reforms. The
government entities to carry out financial transactions Narasimham Committee reports of 1991 and 1998
efficiently. recommended measures to liberalize the banking sector,
enhance competition, improve efficiency, and strengthen
Mobilizing Savings: prudential regulation. Subsequently, private sector banks
were allowed to enter the industry, foreign direct
Banks offer savings and investment products like savings
investment (FDI) was permitted, and banking regulations
accounts, fixed deposits, and mutual funds, encouraging
were relaxed.
individuals to save and channelize their funds into productive
investments. This helps in capital formation and economic
growth. Technological Advancements:
The Indian banking industry witnessed significant
Credit Allocation: technological advancements, particularly with the
introduction of computerization, internet banking, mobile
Banks extend credit to various sectors of the economy,
banking, and digital payment systems. This revolutionized
including agriculture, industry, trade, and services. By
providing loans and advances, banks support economic banking operations, enhanced customer convenience, and
activities, entrepreneurship, and job creation. improved efficiency.
Recent Developments:
Payment and Settlement:
In recent years, the Indian banking industry has faced
Banks provide payment and settlement services through
mechanisms such as checks, electronic funds transfer, and digital challenges such as non-performing assets (NPAs), governance
payment platforms. This ensures the smooth functioning of the issues, and regulatory compliance. The government and
payment system, promoting economic transactions. regulatory authorities have undertaken various initiatives to
address these challenges, including recapitalization of public
sector banks, implementation of insolvency and bankruptcy
Risk Management: code, and strengthening of regulatory oversight.
Banks play a crucial role in managing financial risks by
diversifying their loan portfolios, assessing creditworthiness, Overall, the history of the Indian banking industry reflects a
and implementing risk management practices. They also journey of evolution, from its early origins to modernization
provide insurance and hedging products to mitigate risks for and reforms, shaping the financial landscape and
customers. contributing to India's economic growth and development,
and plays a pivotal role in the Indian economy by mobilizing
Financial Inclusion: savings, allocating credit, facilitating transactions, managing

Banks contribute to financial inclusion by extending banking risks, promoting financial inclusion, and contributing to
services to underserved and rural areas through initiatives economic development and stability.

24 | 2024 | JUNE | BANKING FINANCE