Why Indian banking sector is under criticism and how can it be made better

The Indian government has implemented Centralized Online Real-time Exchange (Core) banking but majority of the Indian population still prefers traditional form of managing their investments. 

Under the NDA government regime, financial inclusion was one of the key focus areas for the government. However, private banking operation in the rural areas accounts for less than 2% of their total operations. Furthermore, loopholes in the banking systems keep these efforts of public sector banks from making any significant difference in the rural banking system. 

Currently, public sector banks form the lion’s share of the banking industry and their key area of focus continues to be priority sector lending in agriculture but in light of the evolving landscape, we can expect private sector banks also expanding their focus to the area. 

Recently, the ICICI Bank and Chanda Kochhar debacle bought the private sector banking under heavy scrutiny by the regulatory bodies and raised concerns about the integrity of the banking system. This sure has tarnished the image of the banking sector and coupled with poor quarterly earnings and rising NPAs only make the conditions worse. Going forward, government will have to make sincere efforts towards financial education to improve the health of the Indian banking industry.

Better awareness among the Indian population is expected to resolve issues related to instability in the Indian financial markets as investments will shift from assets such as gold and real estate to stock markets. This also speaks volume about the financial maturity of a country.