As the Indian banking enters a new decade, it has to address some very critical requirements and challenges. There is a substantial opportunity if these requirements are met with.
These requirements may be classified under three broad heads. The first is the resource requirement. Indian banking needs large quantities of capital. Also, it requires to rebuild its manpower and skill base and perhaps, reshape its technology environment as well. The second requirement involves developing a mechanism to determine the cost the sector is paying to fulfil a larger role in the economy. The sector plays a substantial role in several social initiatives, in addition to a vast developmental role. The third requirement involves the challenges associated with coupling itself with the global economy, though the extent may still be minuscule.
In all these requirements, the government and the regulator will play a significant part. More than 75% of the sector is owned by the government and therefore, the policy framework will play a dominating role here. It is estimated that Indian banking will require about $18-20 billion of capital, each year for the following five years, to meet with the credit expansion and inclusion requirements. This capital requirement will be essential to meet the economic growth at 7.5-8.5% level.
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