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- Phase of Nationalization (1969-1991): India's public sector banks (PSBs) were initially set up as Private Banks and later Nationalized in two waves in 1969 and 1980.
- Entry of New Private Banks (NPBs) post 1991 Reforms: Based upon the recommendations of Narasimhan committee, the RBI issued the policy guidelines to facilitate the entry of new private Banks (NPBs) on a large scale.
- Guidelines for Licensing of Universal Banks in the Private Sector: The minimum initial paid-up capital for setting up new private Bank was set at Rs 500 crores. Resident individuals and professionals having 10 years of experience in banking and finance were also eligible to promote universal banks. However, Large corporate/industrial houses were not allowed to set up Banks but were permitted to invest in the banks up to 10 per cent
- Consolidation of Public Sector Banks (PSBs): Based upon the recommendations of Narasimhan Committee (1991) and P.J. Nayak Committee (2014), the Government has focussed on the consolidation/merger of the PSBs. The Associate Banks of SBI and Bharatiya Mahila Bank got merged into State of Bank of India. It was followed by the merger of Vijaya Bank, Dena Bank and Bank of Baroda in 2018. In the year 2019, 10 Public sector Banks were merged into 4 large banks. After the mergers, there are 12 public sector banks, including the SBI.
Present phase: shift towards greater role of private sector in banking
- Public Sector Banks: The Government has proposed new Public Sector Enterprise Policy wherein sectors would be categorized into - Strategic and Non-Strategic. The Government has designated Banking as Strategic sector, which would mean there would be maximum 4 PSBs and the remaining PSBs would be merged into larger PSBs or privatized.
- Proposal to issue Licenses for Large Corporate Houses: The Internal Working Group (IWG) has proposed to allow large corporate/Industrial houses to open private sector Banks. A large corporate/industrial/business house is defined as a group having total assets of Rs 5000 crore or more wherein the non-financial business of the group accounts for more than 40 per cent in terms of total assets or gross income.
