Nationalization of banks was the first step taken by the government to effectively control the banks and aid in the proper implementation of the monetary policy. The financial sector in India has come a full circle. The nationalized banks were not enough there were other old private sector banks, which could not meet the parameters to join the elite list. However, the significance of these banks in the financial system cannot be overlooked. Foreign players were also allowed to open branches here to meet the export requirements. That was also time when the Indian banks started opening branches overseas. This was a system, which envisioned the socialistic sentiments. The savings were understood to be safe with the banks but the customer services was the last in the priority list. This was also a time when the banks recruited people enmasse resulting in a bloated workforce. The disbursement of funds were largely dictated by the government rather than to the most deserved. Corruption was widespread. Risk management was never pursued. As a result the Non-Performing Assets (NPA) piled up. This deteriorated the financial health and brought a few banks to the brink of closure.

As the liberalization dawned on the horizon it set to un do what two decades of nationalization did. Private players entered the markets. Foreign players were allowed to take part. Globalization became inevitable. Competition brought the customer to the forefront. While all this was happening the nationalized banks took the first few steps to adjust to the new environment. Despite a fierce opposition from the employees unions, Voluntary Retirement Scheme (VRS) went through. The most challenging project of them all-the disinvestments is being looked into seriously. All this in the effort to join globalization. The adherence to global standards is a necessity. Some banks found it difficult and the merger to survive became an option. As with any new industry consolidation set in. This decade saw some of the largest consolidations in the banking history. As the second generation of reforms took off the goal of offering all the financial products under one roof (Universalization) became the strategic tool. Banks tied up with insurance companies to offer insurance products.