Today, Public Sector Banks (PSBs) dominate the Indian banking scene. This dominance is the result of the nationalization of banks which was undertaken in 1969, and since then the banking infrastructure has expanded manifold. Market forces entered the Indian banking industry only after the initiation of widespread financial sector reforms at the beginning of the 1990s. With a focus on financial sector reforms, the Indian banking industry was subject to significant changes, change in ownership structure being one among them.

Indian banking industry is pre dominantly occupied by Public Sector Banks (PSBs). Over 70% of bank deposits and advances are cornered by them. With the advent of new generation private sector banks, PSBs lost substantial ground in terms of business as also profits. At present, there are nine new generation private sector banks operating in the country with Yes Bank being the latest entrant. Private sector banks have a market share of 21% in deposits and 20% in advances.Though these banks had the initial advantage in terms of better technology platform, aggressive marketing techniques and nil baggage of Non-Performing Assets (NPAs), PSBs have taken the initiative to regain the lost ground. As we know, the nationalization of banks was undertaken to achieve the social objective of taking the banking to masses. Even as the ownership changed hands, banking infrastructure expanded manifold in a short span of time.

Financial sector reforms formed an important element of the wider economic reforms that were initiated during the early 1990s. These reforms were necessitated by macroeconomic imbalances on the external and internal fronts. Poor fiscal management coupled with rising crude oil prices precipitated the crisis. The response to the crisis spilled over into the banking domain too.Banking sector reforms were based on the recommendations made by the Narasimham Committee. These recommendations were to be implemented at the beginning of 1992-93 and spread over a three-year period. The reforms focused on improving transparency in the operations of financial intermediaries, strengthening their balance sheets and making them transparent, implementing prudential norms in the areas of asset classification, provisioning income recognition and capital adequacy. The aim was to strengthen the financial and banking infrastructure and make it world class, capable of supporting the process of liberalization and increasing globalization of the Indian economy.

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