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 –

  • 10 Public Sector Banks Merged into 4

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.

  • Loan Rates came down as RBI reduced Lending Rates

    To increase the economy growth a lower repo rate is required.  Reserve Bank of India took necessary steps to reduce the repo rate and reverse repo rate by cutting down the lending rates frequently. Repo rate is the rate at which RBI borrows money from commercial banks. It was reduced from 5.15 % to 4.90 %.

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.

  • Aadhaar and PAN Card Authentication Mandatory to Fill ITR

    Citizens of India had Aadhar Card and PAN card for a long time but they were just separate documents without being linked at all the necessary mediums.  The Aadhar card was necessary to be linked to the bank accounts of all the people otherwise it was difficult to carry out any financial activity. Later, Aadhaar linked KYC became a compulsion for existing and new account holders in banks. In September 2019 the supreme court’s judgement made it necessary to link Aadhaar Card and PAN card to file the income tax return. This came into effect in April 2020 and the ones who haven’t linked it won’t be able to file their income tax returns.


  • Banking became Easier with Digital Options

    In recent years technology upgraded at a rapid rate and everyone started using mobile phones. With this upgradation in technology it was necessary for the banks to tap into the opportunity of bringing the activities of banking on the mobile phones. Thus, many banks started building their own applications to make it easy for the customers to use and access them. All the activities that required customers to visit the bank were provided in the applications. The banks also integrated Artificial Intelligence and Analytics technology in their applications to monitor the customer’s activities, needs and the required data. 

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.


  • Revised ATM Mechanisms for Safe and Secure Transactions

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. 


Spread the word

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email