Various banking sector reforms have been introduced in India to improve the efficiency and upgrade the quality of banks so that Indian banks can meet the internationally accepted standards of performance. These reforms were brought in to make the banking sector by financing authorities to make it more transparent, secure and convenient for the general public.
Below we look at the major reforms in the banking sector –
This task was carried out to reduce the large number of public sector banks into 3 or 4 Global sized banks which would stand equally with other major banks in the world. It has two advantages, first one was the authorities would be able to monitor less number of banks easily and second, the major banks would be able to grant more loans to people/companies because of merged capitals. This change came into effect in April 2020. The banks which were merged are as follows –
Punjab National Bank was merged with Oriental Bank of Commerce, and the United Bank of India; Indian Bank with Allahabad Bank, Canara Bank with Syndicate Bank, and Union Bank of India with Andhra Bank and Corporation Bank.
RBI also made sure that the banks link their floating interest rates on loans to the RBI’s Repo rates. This would be beneficial for the customers as it would increase liquidity and bring more transparency in the market. All the measures taken by RBI were set to benefit the loan borrowers as it can help customers save more on their interests.
This helped small businesses and shop owners to use the platforms such as Paytm and GooglePay more frequently. Payments went from exchanging cash to transferring money through UPI. In October 2019 there were over a billion UPI transactions in India. This was a great shift towards the cashless economy.
New ATM cards with magnetic chips were brought into effect and the old ones were wiped out. Some customers already had the ATM cards with magnetic chips but it was made a compulsion to have them. So, all the customers had to exchange their existing ATM card with new ones. The old ATM cards had to be swiped but the new ones were kept inserted in the ATM machine till the transaction was over. This made the ATM transactions more secure and safe.
Apart from that the number of free transactions were increased to 5 each month inclusive of GST. The failed ATM transactions due to technical errors were not considered in the 5 free transactions.