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Banking Deregulation

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As the name itself suggests, this article will tell you about how the banking sector was deregulated by RBI (Indian Union Government) and what boost it gave to Indian economy i.e. banking sector and ultimately brought it at par with other economies that are crucial to global financial system’s smooth functioning.

What is Banking Deregulation

RBI initiated the banking deregulation process in India on 25th Oct, 2011. With this launch, it deregulated the savings deposit interest rates in Indian Banking Sector. In other words, earlier RBI used to fix deposit rates for all Indian banks.

But post deregulation, banks be it of any nature by ownership:

  • Public
  • Private
  • Semi-Private
  • Cooperative

They all were now free to offer interest rates of their choice to get new customers. This RBI move was aimed at promoting growth in Indian banking sector by taking the special benefits feature off from public sector banks, as they were till date run on govt. provided funds and even in the case of operating losses, they were not re-evaluating their offerings policy to curb the losses.

Whereas private banks had no option but to shutdown their businesses, as sometimes the current economic scenario was not feasible for them to offer the RBI mandated interest rates and in good times to generate more revenues they could not offer better interest rates.

Overall, this banking deregulation created an even operating atmosphere for all banking sector players.

Moving ahead more and more international banks arrived in India to began their operations, as till date India was understood as a partial market with no justice for private sector banks, but now it became a open to all and free for all market.

To conclude, Banking Deregulation came as a boon for Indian economy and banking sector. As now its local banks too became international players and international players landing in Indian sector contributed in large to make it a quality banking system, by introduction of new banking solutions that were in use in the world.

Some of the International banks operating in Indian Banking Sector:

  • HSBC
  • DBS Bank
  • Bank of America
  • Deutsche Bank
  • Bank of Bahrain and Kuwait