During
the last century, commercial banking in India, had passed
through major part of the period in private sector banking
(till 1969) and thereafter till 1990s, the majority
of the banking was under the control of the central
government, translating the policies of the government
into action, mainly concentrating on branch expansion,
and lending priority sectors including weaker sections.
To a great extent, lending to large corporates was under
the close scrutiny of the government, and the banking
system was totally under regulative and administered
interest rate regimes till 1990. Asset classification
and income recognition were at the discretion of the
banks.
In
this context, Indian commercial banks were doing the
business of accepting deposits and lending or investing
in government securities. Reserve Bank of India as the
central banker was in effective control of the commercial
banks and whatever the products and services the commercial
banks offered till early 1990s, was purely in conformity
with the Banking Regulation Act. Most of the deposit
schemes were traditional, current, savings and term
deposits within the ambit of the RBI guidelines. Likewise,
on lending, the commercial banks had the portfolio by
way of loans, overdraft and cash credit and bills portfolio.
Since the majority of the banking system was in the
public sector, and interest rates were regulated, and
development financing was taken care of by term lending
institutions, commercial banks had very little to offer
by way of innovation in products and services. |
