Growth Of Banking In India Of Scheduled Commercial Banks

Picture the state of the Indian banking sector back in the day. Loan processing was limited to just a handful of branches, and the reach of the Indian banking system was quite restricted. Loan approvals used to stretch over 25 long days, and you were restricted to visiting only a very limited number of branches. Fast forward to today, and the loan processing time has been dramatically reduced to just 2 days.

This transformation became feasible due to the extensive growth of the banking system throughout the country. Refer to the chart below, illustrating the expansion of bank branches in India.

In 1990, a pivotal moment occurred in the Indian economy with its liberalisation. This era saw a select number of banks undergoing privatisation.

When per capita incomes double, people's aspirations change. They begin to desire homeownership, better infrastructure, such as improved roads, and access to car loans.

This change dispelled the previously held notion of being reluctant to take loans.

Looking back at history, it's clear that we embraced loans and credit card usage, leading to significant economic development.

While many criticised the loan-dependent lifestyle, only a few visionaries saw it as a path to growth.The second factor was people's initial aversion to technology. Many were unwilling to withdraw money from ATMs due to concerns about receiving incorrect or reduced amounts without any proof to substantiate their claims. However, this technological apprehension gradually waned, leading to the widespread acceptance of ATM facilities and their subsequent growth.

Bank employees called for a protest, aiming to halt the proliferation of ATMs, as they perceived it as a potential threat to their job security, which could lead to increased unemployment. Despite these challenges, progress continued, and India advanced.

The below chart shows the ATM Proliferation in India.

In those circumstances, a handful of forward-thinkers foresaw India's growth potential, anticipating an increase from 5% per annum to 10% per annum GDP. They envisioned that as the nation advance, the banking system would follow suit. Investing in banks that embraced technology and expedited loan distribution would create wealth.

Rising income and education levels: As people get educated, they become more aware of brands and prefer to buy branded paints. Their incomes also go up, especially when working for multinational companies, which makes it easier to get bank loans, including home loans.

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