Projected to become the third-largest banking sector in the world by 2050, India’s banking sector is in need of both reform and innovation. The future of Banking in India is expected to rely on domestic financial technology (Fin-Tech) companies along with sectoral reforms which should aim at reducing bad-debt generation. Indian PSUs presently are in need for regular capital infusions and the reforms could be aimed at self-sustenance to prevent unrequited Mergers and secure a competitive banking industry.
Key drivers expected to drive the future of the Indian banking sector include addressing the Bankruptcy Code and the operational charters of Indian PSU banks as well as cultivating a robust domestic fin-tech industry.
The future of banking in India is also expected to revolve around a cashless banking revolution which will integrate cutting-edge financial security technologies. It will also drastically reduce operational costs of all banks by eliminating human operators from redundant financial positions.
Another major area of interest that will drive the future banking sector in India is the total integration of major payment gateways for all types of transactions. This includes, but is not limited to, cross-service payments, inter-bank payments, social security payments and the elimination of transaction fees. Blockchain is a worthy contender for the RBI to experiment with, especially with the growing number of mobile banking users and transfers.
The Indian banking industry is also expected to see a rise in credit-based spending patterns, much like in the US or Europe. This will set in once the general public opens up to the idea of using credit cards over the dominant debit card payments. Credit-based spending will result in a massive boost to the industry and the economy as a whole, but learning from the US, the government must also enact reforms to several regulations to prevent a domino effect.
Dr. Charan Singh is presently the Chief Executive of (EGROW), Foundation for Economic Growth and Welfare. He is also serving as the Non Executive Chairman of Punjab Sind Bank. He was previously visiting faculty and former RBI Chair Professor at the Indian Institute of Management Bangalore, India, a Senior Economist at the Independent Evaluation Office of the International Monetary Fund, Washington DC and Research Director (Departments: Economic Policy, Debt Management) at the Reserve Bank of India.