Overview of the Banking Industry in India

Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, order or otherwise." To put it in layman's terms, a bank is a financial institution primarily engaged in the business of borrowing and lending. Apart from this the bank also provides services for money transfers (remittances), act as trustees (to various organisations), act as custodian for valuables (gold, diamonds etc) and government business (tax collections, salary/pension distribution etc). In the process, a bank makes money by borrowing at a lower interest rate and lending it at a very high interest rate (usually a difference of 5-15 percent) and levying charges for the services offered.

The Reserve Bank of India (RBI) is the apex body or ombudsman of banking in India. Among various functions, RBI's role is also to prescribe broad parameters of banking operations, within which the country's banking system functions. The ombudsman is also responsible for protecting depositor's interest by framing relevant policies and by maintaining accounts of the bank. RBI also has to make sure that the banking services remain cost-effective.

RBI data shows that in all there are 239 banks operating in India with nearly 75,000 branches and 35,000 ATMs across the country. As on March 2008, the deposits at commercial banks stood at Rs. 30, 75,224 crores, and as projected by RBI, this will touch Rs. 57, 50,000 crores by 2010.

India's first commercial bank, Bank of Hindustan was incorporated in 1870. India's touch with modern commercial banking came only after RBI was set-up in 1921. The year 1949 was significant one as this was the year in which Banking Regulation Act 1949 was passed by Government of India imparting RBI powers to supervise and control banks in India.

Today banking industry in India is divided into two categories viz. Commercial Banks and Co-operative Banks. The commercial banking sector is further sub-divided into Scheduled Commercial Banks (SCB, banks which meet certain criterion are laid by RBI) and Unscheduled Commercial Banks. Public Sector Banks, Private Banks and Foreign Banks all come under SCBs.

Primary Urban Co-op Banks, Primary Agricultural Credit Societies, District Central Co-op Banks, State Co-operative Banks and Land Development Banks all fall under the umbrella of Co-operative banks. Each of these banks differs in type of business they do, target customers and level of operations.

Most of today's banks are no longer restricted to just banking services. They have evolved to what is generally referred as Universal Banking, which means, offering wide range of financial services beyond commercial banking. These services may be in the form of investment advisory and related services, insurance, credit cards, mutual funds etc.

Jobs in banks can be categorised into front office and back office jobs. Employees who come in direct contact with customers handle the front office operations of the bank. Marketing and sales, financial consultancy, operations and management are some of the fields in which front office jobs fall. Graduates in any discipline are eligible for such kind of jobs and are hired as Probationary Officers at entry level by the banks. Owing to their qualification, MBAs have an edge over graduates as far as banking jobs are concerned. Apart from the educational qualification good communication skills, interpersonal skills, customer centric approach and basic knowledge of the industry is enough to get selected. The entry level pay scales range usually fall in the range of Rs. 1.8 to 3.6 lacs per annum, depending on bank (public, private, foreign), mode of recruitment (campus) and qualifications. Experienced personnel's get paid depending on area of expertise and experience.

Back office jobs require certain qualifications. These jobs are usually related to completion of transactions, general ledger work and overall supervisions. More specialised jobs may be related to fields like project analysis, credit appraisal, foreign exchange etc. MBAs, CAs, commerce/economics graduates are hired for all such kind of jobs because of their complexities. The pay scales again vary from bank to bank, candidates experience and qualifications.

Come 2009, foreign banks would be allowed banking presence in India either through establishment of subsidiaries incorporated in India or through branches. This will intensify the competition between existing players as well as new entrants. This of course would require a large workforce within this industry. India's top three banks SBI, ICICI and HDFC together employ close to 2,58,000 people. Considering the number of banks at present and the number that will be setting shops in India, the employment generated in this sector would be huge. At present the banking industry employs close to 1.2 million people, which will be 1.5 million by 2010 and will generate revenues to the tune of $16.5 billion, a report titled Indian Banking 2010 by McKinsey states. And if allied services like bancassurance, investments advisory etc are to be taken into consideration, than an additional one million jobs would be generated.