Indian banking has come a long way since its nationalization in 1969. Nevertheless, to sustain the growth momentum in the long-term, Indian banks need to have adaptive business models, be capital-efficient, and institutionalize a risk-conscious culture across the organizations.

The global financial crisis has not impacted the Indian banks as severely as it has affected their western counterparts due to the regulatory policies and the `conservative' approach (which in hindsight appears to be prudent banking) adopted by the Indian banks. However, in the last several months the credit growth has slowed down considerably due to the economic downturn and segmental pressures on NPLs, leading to cautious lending by the local banks. At the peak of the global credit crisis, such a situation was also catalyzed by liquidity issues till massive dosages of intervention by the RBI reined in the situation. It was imperative for the Indian banks to counter this phase through a well thought out strategy, coupled with increased efficiency in operations. While there are indications of a credit letup in the last two quarters, it is still benign, and banks are expecting credit demand to pick up from the third quarter onwards.

The last few years have seen the Indian banking sector touch new heights, with advances and deposits growing more at a CAGR of more than 25% during FY06-09. This growth has allowed Indian banks flexibility in asset structure, enabled a higher capital base, and therefore helped the banks generate system-adaptive efficiencies. The Public Sector Banks (PSBs), which had been laggards in terms of operational efficiency, customer service and innovative products in the 1990s and at the beginning of this decade, proved the adage: even elephants can dance! Waking up to the challenges of efficient growth following the entry of fiercely competitive new private sector banks in the last few years, the PSBs, which were used to `lazy banking', have been forced to take cognizance, as the new private sector banks captured market share with the use of aggressive marketing and fast adoption of sophisticated technologies and more innovative products. Today, the marquee names in Indian banks include the likes of SBI, Punjab National Bank and Union Bank, which have legitimately earned their place under the sun by reengineering their business processes, clearly articulating their strategic objectives using their resources and capital more productively, and turning their distribution reach (branch network) to their advantage with liberal doses of technology.

The Analyst Magazine, Indian Banking, Global Financial Crisis, Economic Downturn, Reserve Bank Of India, RBI, Risk Management, Capital Management, Customer Services, Core Banking Solution, CBS, Human and Capital Resources, Public Sector Banks, PSBs, Global Credit Crisis, Ffinancial Inclusion.