Banking: The Power-House Of Economy Article

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Banking: The Power-House Of Economy

Indian banking is reshaping and remolding itself to meet the challenges ahead to cater to the needs of our massive population. Retail banking is one such sector which is catching on fast wheels of late.

Author: Addi Vardhaman

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With the change in the Indian economy from a manufacturing one, which never really started off, to the service sector, banking as an institution is undergoing a sea change. A larger and larger part of the consumers is increasing on its demand for financial and economic products.

Periodic customization of services and financial products is fast turning in to a norm than a mere hypothesis of financial economy. The Retail banking sector in India is expected to rise at a rate of 30 percent. The major players in the banking industry are concentrating more and more on the Retail in banking.

Most of the banks are accepting the potential of this segment of banking. Further, the banking industry as a whole is witnessing structural upheavals in the regulatory frameworks, securitisation and other aspects of the trade. In fact, more and more stringent NPA norms are expected to be in place by 2004 in order to enable the banking entities successfully adapt to the changing dynamics of modern banking; because the faster one takes on the latest developments, the better he is expected to get the advantages in the present and future.

The Indian banking players are a bit bullish on the Retail front and this thing is not completely unfounded. There are two major reasons behind all this. First, it is now almost undeniable that the attitude of the Indian consumer is changing a lot. It is reflected in a positive deviation in the urban household earnings. The direct consequence of such a change are the consumption patterns, which in turn affects the banking habits of the people. The banking psyche of the Indians is expected be tilted towards the Retail products.

Yet at the same time, India compares very poorly with other global economies which are now going speedily ahead in terms of the spending patterns and trends with the opening up of the world economy under globalisation. For example, while the sum total of all the outstanding Retail loans in Taiwan is around 41 percent of GDP, the same thing in India is hopelessly less than 5 percent.

The comparison with the Western economies is even more staggering and disappointing. Another type of comparison which is quite natural when comparing the global Retail sectors is the use of credit cards across various economies. In this matter also, the potential which still lies to be tapped is proved by the fact that of the total consumer expenditure in the country in 2001, not even 1% was through plastic transactions. While in the US the figure stands at a very promising18 percent mark.

About Author

The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting Paisawaisa as a finance specialist.

For more information related to finance community please visit: http://www.paisawaisa.com/banking/current-account.aspx

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