As per the reports of the Reserve Bank of India (“RBI”), India’s banking sector is sufficiently capitalized and well-regulated. The financial conditions and the economy in the present moment are far better than any country in the world. Be it credit, market or liquidity risk studies and surveys, they all suggest Indian banks have withstood the global downturn efficiently and can recover quickly from difficult conditions. India is said to be one of the fastest growing economies in the world.
The digital payment evolved overnight after the Prime Minister’s measure of Demonetization in 2016. According to FSI reports, India developed the most in the 25 countries with India’s Immediate Payment Services (“IMPS”) being the only one which is placed at Level 5 in the Faster Payments Innovation Index (“FPII”). Also, RBI has allowed more features such as unlimited fund transfers between wallets and bank accounts, these wallets are expected to become really strong players in the financial ecosystem. The unorganized retail sector has a huge untapped potential of adopting digital mobile wallets for payments, as per a report by the Centre for Digital Financial Inclusion. Around 63 per cent of retailers are interested in using digital modes of payment.
Evolution of Banking Law in India
The Indian banking system has evolved from a caterpillar to a butterfly in the last two centuries. In the ancient times, banking was mainly handled by businessmen such as the Sharoffs, Mahajans, Seths, Sahukars, etc. They performed the usual function of lending money to traders and craftsmen and sometimes placed their funds at disposal for the war chest of the kings.
Modern-day banking started around the last decades of the 18th century, with the General Bank of India and Hindustan Bank coming into existence. Then the three presidency banks were made which were – Bank of Madras, Bombay and Calcutta. The presidency banks acted as quasi-central banks for quite a while. They merged into what was called as Imperial Bank of India in 1925. The swadeshi movement inspired the Indian business community to form banks of their own from 1906 to 1911. A number of banks established then have still managed to survive till date, which includes Canara Bank, Indian Bank, Bank of Baroda and the Central Bank of India etc.
A landmark event which marks the evolution of banking happened in 1934 when a decision to set up Reserve Bank of India was taken. It started functioning in 1935. RBI has since been the central bank of the country and the regulator of the banking sector. It derives its powers from the RBI Act, 1934.
The two other major events in the modern banking era are the nationalization of 14 largest commercial banks in 1969, through the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969. Later another set of 4 banks were merged, taking this count to 20. At this point, more than 90% of all banking business in India was controlled by Government of India.
Post the government’s liberalization policies, a host of private players entered into the India banking market where RBI made sure that they were being closely watched and strictly regulated. Further, there were regular checks on the compliance of various guidelines and any irregularities would have lead to the disqualification of their licenses.
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