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Banking in India

We take a look at how the Indian government is helping get more bank accounts open

19Feb

India's private banks have gained ground on their public counterparts, once the backbone of India's banking sector. Far from a happy environment, there's been a number of occasions where strikes have occurred in recent years.

Still reaching millions of people throughout the country, public sector banks saw their net profit decrease by 27%. The country's biggest bank, State Bank of India, which serves more than 200 million people, was the most profitable, doubling the Bank of Baroda's net profit in 2014. In contrast to this, the State Bank of Mysore saw its profit after tax remain relatively stable, whereas the Central Bank of India and the United Bank, saw their profits after tax decrease drastically.

The banking system in India has come under increased scrutiny this year, with the government's attempt to get the poor bank accounts which aren't affected by costly subsidies. The Prime Minister, Narendra Modi, started this scheme off in August, with 75 million new accounts targeted by the end of January. It's now February and the scheme has been a success, with 120 million new accounts open.

It's been claimed that almost every household in the country has a bank account. Whilst this all sounds good, the Indian government has been in this situation before, when an initially successful bank account drive in 2010 turned sour after the majority of the accounts were left dormant.

The fear is that this could be repeated unless the government doesn't continue to develop upon the scheme. At the moment, two-thirds of the accounts are empty, something which was expected, but still doesn't make for great reading. Despite this, 330 billion rupees have been transferred into the accounts, far more than was deposited before.

The government has added extra benefits for customers who use their ATM cards every 45 days, giving them free accident insurance.

The fact that the public sector banks aren't thriving at the moment will not make the continual development of this initiative any easier. Because of this, cash remains king in India, but it could soon be the other way round and this government scheme could be turning the tide in India.

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