Indian Banking Sector: New Players, New Plays
Bank sector reform in India has been slow. The domination of state-owned or Public Sector Banks (“PSBs”), which began with the nationalisation of banks in 1969, was loosened in the nineties to allow some private players (most of whom enjoyed the patronage of larger domestic institutional players) but under strict licensing restrictions, making a ‘bank license’ a scarce and valuable resource.
More than a decade after the last two private entrants, YES Bank and Kotak Bank, the sector is witnessing a surge of new entrants. These new entrants hold promise to bring in vast proportions of the Indian population who are currently outside the formal banking sector. The key question that remains is if it can be done in a commercially viable manner.
This paper takes a brief look at some of these changes, all of which represent a significant shift in the manner in which banking players, incumbents and new entrants will operate.