Globalization is both a challenge and an opportunity for Indian banks to gain strength in the domestic market and increase presence in the global market.

Globalization refers to extensive and liberal movement of goods, capital and people across nations. In India, the globalization process took off after 1991 in the shape of banking reforms, which can rightly be called a watershed event in our march towards globalization. Various reform measures introduced in India have indeed strengthened the Indian banking system in preparation for the global challenges ahead. In particular, the following changes have been taking place and banks in India have done well so far in taking up these challenges in their stride.

a. Interest rates have moved downward to conform to the global pattern. Global competitiveness of producers in India also requires interest rates which conform to the global pattern. Also, spreads have fallen by as much as 3%, while the figure was 6% prior to 1991, necessitating a quantum jump in the need for cost control measures and productivity goals.b. Foreign trade as a percentage of GDP, which was less than 10% before 1991 now exceeds 20%. Thus, the demand for trade finance, payment services and investment volumes has a higher foreign component than before. Indian exports have multiplied enormously; concomitantly, the foreign activities of Indian banks have increased.

The Analyst Magazine, Globalization, Indian Banking System, Global Competitiveness, Cost Control Measures, Indian Banks Association, IBA, Global Economy, Basel II, Information and Credit Rating Agency of India, ICRA, Human Resources Optimization, Mergers and Acquisitions, Risk Management.