Liberalisation in the 1990s

➡️ Join Whatsapp Group
➡️ Join Telegram Group

In the early 1990s, the Indian government initiated a liberalization policy, which included licensing a limited number of private banks. These new banks, termed as New Generation tech-savvy banks, included Global Trust Bank (the first of its kind), which later merged with Oriental Bank of Commerce, as well as IndusInd Bank, UTI Bank (now Axis Bank), ICICI Bank, and HDFC Bank. This policy shift, coupled with India’s rapid economic growth, revitalized the banking sector, with significant contributions from government banks, private banks, and foreign banks.

The next phase for Indian banking involved proposed relaxations in foreign direct investment norms, potentially allowing foreign investors in banks to hold voting rights exceeding the current cap of 10%. In 2019, Bandhan Bank specifically increased its foreign investment limit to 49%, later raised to 74% with certain restrictions.

This policy overhaul disrupted the traditional banking sector in India. Until then, bankers had typically adhered to the 4–6–4 method (borrow at 4%, lend at 6%, go home at 4%), known for its simplicity. The new era introduced a modern outlook and technology-driven operational methods to traditional banks, sparking a retail boom as customers demanded and received more from their banking services.