Part - I

Introduction

The developments in the Banking sector during the last 12 years have created turmoil in the annals of Banking Industry. From a Mass Banking scenario we have moved back to Class Banking and from Service from being the prime mover of the banking activity we have reverted to Profit as the main criterion for the main working of the bank. From branch expansion we are moving towards branch rationalization (reducing the number of branches on the basis of viability/non viability) and from mass recruitment to voluntary retirement schemes with selective recruitment and finally from least technology driven banking to total branch automation and Inter-Branch linking called by different names in different banks. For example, Anywhere Banking, AAA Banking, Multiple Branch Banking, etc.).

In the lending side, Banks were very particular in the end use of funds and hence personal banking was never encouraged. On the contrary, today, every bank is trying to increase their Personal Banking Portfolio, through various loans where the banks do not even ask for the purpose of the loan. The banking system in India has moved away from the regulated environment to free environment in the areas of deposits and advances. Banks are no more restricting their activities to deposits and advances; they work with the motto of offering 'Integrated Total Package Solutions to all needs of a customer'. To clarify this, what we mean is, Bank have gone to the extent of booking cinema tickets, paying utilities bills, school fees, sending bouquets to the relatives of the customer on special occasions, etc. Universal Banking is becoming the order of the day. Universal Banks in general refer to the combination of "commercial banking and investment banking", i.e., issuing, underwriting, investing and trading in securities. In a very broad sense, however, the term 'Universal Banks' refer to those banks that offer a wide variety of financial services, including insurance.

Banking in the Future - The Shock and the Effect

All along the Banks have had a friendly personal face. Moreover, the banks have tried to be Social Institutions. They have been a part of Society by financing less privileged class to bring them above poverty line; by undertaking some social responsibility like planting of trees, provision of drinking water facilities, construction of public toilets, etc. Banks were seen as a place for keeping the hard earned money of individuals safe but also as a short-term interest earning place. All customers liked to be recognized at the Branch they were banking with. Customers liked to go to bank either for pure deposit transactions or for purchase of DD or for availing a loan.

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* Contributed by -
Aditya Khemani, PGDM - II Year,
Tuhina Singh, PGDM - I Year,
IIM Lucknow.