The Indian banking scenario witnessed a significant development in the recent years with the entry of private banks and their focus on retail banking and convergence of services. The business models of the leading players are adapting to this impending change as banks widen the spectrum of savings and loan products they offer. Private banks are the best positioned to acquire market share in the emerging scenario.
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A change is expected to make mergers between banks and Foreign Institutional Investors (FIIs) possible, which will benefit large private bank group(s). Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. During the Mogul period, the indigenous bankers played a crucial role in lending money and financing foreign trade and commerce. During the days of the East India Company, it was the turn of the agency houses to carry on the banking business.
The General Bank of India was the first Joint Stock Bank to be established in 1786. The others, which followed the suit, were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906, while the other two failed in the meantime. In the first half of the 19th century, the East India Company established three banks: the Bank of Bengal in 1809, the Bank of Bombay in 1840, and the Bank of Madras in 1843.
The Bank of Bengal, the Bank of Bombay, and the Bank of Madras, also known as Presidency Banks, were independent units and functioned well. These three banks were amalgamated in 1920 and a new bank, i.e., the Imperial Bank of India was established on January 27, 1921. With the passing of the State Bank of India Act in 1955, the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India.
The Reserve Bank, which is the Central Bank, was created in 1935 by passing the Reserve Bank of India Act, 1934. In the wake of the Swadeshi Movement, a number of banks with Indian management were established in the country, namely, Punjab National Bank Ltd., Bank of India Ltd., Canara Bank Ltd., Indian Bank Ltd., the Bank of Baroda Ltd., and the Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and on April 15, 1980, six more commercial private sector banks were also taken over by the government. The banks operating in the present commercial banking system in India may be distinguished into Public sector banks, Private sector banks, Foreign Banks, Co-operative banking sector, and Development banks.
The process of globalization and liberalization has also influenced the Indian banking industry. In the post-liberalization period, there has been an ardent need to bring about structural changes in the Indian banking system so as to make it economically viable and competitively strong. In the changed environment, a series of reformative steps has been undertaken by the Government of India and the Reserve Bank of India on the basis of the recommendations of the Narasimham Committee to improve the working of banks in line with the international banking practices. The changes that have come about are greater degree of operational autonomy, deregulation of interest rate system and free pricing of products, consolidation and restructuring of weak public sector banks, freedom to open new branches, improved credit delivery mechanism, legal reforms to expedite recovery of bank dues, etc.
The emergence of new private sector banks as well as the entry of new foreign banks in this era has thrown tremendous challenges in the form of tough competition among the Indian banks. As a result, cost consciousness, credit management, efficient utilization of all resources, profitability and overall efficiency have got paramount importance for the survival and growth of the banking business. The spirit of competition and the emphasis on profitability are also forcing the public sector banks towards greater profit orientation in a departure from the socialistic approach followed for decades
The process of globalization and liberalization has exerted huge influence on the Indian banking sector. The ongoing reforms in the banking sector, with their thrust on transparency, efficiency and profitability, have forced the Indian banking sector to adopt suitable strategies with focus on productivity, profitability, competitiveness and sustainability Union Bank of India The Union Bank of India was built up in twentieth century and inaugurated by the Father of the Nation, Mahatma Gandhi. The bank with its efficient value-added services, sustained growth, consistent profitability and development of new technologies has ensured complete customer delight, living up to its image of, “GOOD PEOPLE TO BANK WITH”.
Union Bank of India is a Public Sector Undertaking consisting of 55.43% Share Capital held by the Government of India. Institutions, Individuals and Others presently hold the rest 44.57% of Share Capital. Union Bank of India (UBI) is one of India’s largest state-run banks and is also listed on the Forbes 2000. UBI has been ranked at 5th position among the nationalized banks in India.