The government took very necessary initiatives to bring necessary reforms in its banking sectors. After allowing the privatizing of the banks, the number of private banks between 1969 and 1980 grows rapidly (Banerjee, Cole and Duflo, 2006). Such initiatives have caused to increase the competition by maturing the banking sectors. The appreciating economic condition of the Indian economy is another major factor for better opportunities and competitions. Some of the major economic indicators of the Indian economy are given below. As per the above figure, the Indian economy is rising at a higher rate in spite of the global downturn of 2008.
India has become a favorite market for many players and hence, many international banks like HSBC, RBS, and Bank of America etc have already entered. Moreover, McKinsey& Company ha reported that Indians’ disposable income is expected to rise by 25% from 22% by 2025 which will enhance the overall saving indicating better opportunities for the banks in India (Narayanswamy and Zainulbhai, 2007). The social structure of India is also reshaping as consumers' awareness among Indians is raising. India’ s 1.17 billion populations are said to have a higher availability of customers and clients (U. S.
Department of State, 2010). The Reserve Bank of India is the chief regulatory body responsible for regulating the banking sectors. The use of information technology in Indian banking sectors has been raised significantly and the Banks in India are constantly increasing their IT expenditures. The following diagram represents this. Due to constant developments in Indian banking sectors, it is in its growth stage. Every other day, the banks are trying to develop new services, new technology, and new products etc which lead to restructuring the entire banking industry.
The following figure depicts the industry life cycle and position of banking sectors. Porter’ s five forces model is helpful in measuring the industry competitiveness which includes bargain power of suppliers & buyers, the threat from substitute and potential entrants, and existing rivalry.
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