Banking and Financial Markets in India: 1947-48 to 2019-20

Financial sector is the linchpin of an economic system. A modern economy, characterised by acute specialisation and exchange, is unthinkable without financial intermediaries and financial markets. After nationalisation of commercial banks in 1969 and 1980, banking business in India was a near-monopoly of the Government of India. Resultantly, banking sector suffered from lack of competition, low capital base, low productivity and high intermediation cost. The role of technology was minimal and the quality of service was poor. It was in this backdrop, that wide-ranging banking sector reforms in India were introduced as an integral part of the economic reforms process initiated in the early 1990s. Banking sector reforms have supported the transition of the Indian economy to a higher growth path, while significantly improving the stability of the financial system. In comparison to the pre-reforms period, the Indian banking system today is more stable and efficient. Information technology (IT) has transformed the functioning of banking business. Banks are using electronic and telecommunication networks for delivering a wide range of value added products and services. Financial markets in India have seen considerable development since financial sector reforms were initiated in the 1990s. The process of transition in respect of all financial market segments has been largely disruption-free, accommodating the unique features of the existing system while trying to align with the best international practices. Prior to the onset of financial sector reforms in 1991, the capital market structure in India was subject to several controls and opaque procedures. Indian capital market has witnessed a series of reforms since the early 1990s. This book traces developments in the banking sector and financial markets in India since Independence in 1947.