Banking Industry - Vision 2010
[Source: IBA Committee under the Chairmanship of Shri S C Gupta, CMD IOB ]

Introduction - Genesis of Setting up the Committee

Financial Sector Reforms set in motion in 1991 have greatly changed the face of Indian Banking. The banking industry has moved gradually from a regulated environment to a deregulated market economy. The market developments kindled by liberalization and globalization have resulted in changes in the intermediation role of banks. The pace of transformation has been more significant in recent times with technology acting as a catalyst. While the banking system has done fairly well in adjusting to the new market dynamics, greater challenges lie ahead. Financial sector would be opened up for greater international competition under WTO. Banks will have to gear up to meet stringent prudential capital adequacy norms under Basel II. In addition to WTO and Basel II, the Free Trade Agreements (FTAs) such as with Singapore, may have an impact on the shape of the banking industry. Banks will also have to cope with challenges posed by technological innovations in banking. Banks need to prepare for the changes. In this context the need for drawing up a Road Map to the future assumes relevance. The idea of setting up a Committee to prepare a Vision for the Indian Banking industry came up in IBA, in this background.

Managing Committee of Indian Banks' Association constituted a Committee under the Chairmanship of Shri S C Gupta, Chairman & Managing Director, Indian Overseas Bank to prepare a Vision Report for the Indian Banking Industry. The composition of the Committee is given at the end of the report.

The Committee held its first meeting on 23rd June 2003 at Mumbai. Prior to the meeting the members were requested to give their thoughts on the future landscape of the banking industry. A discussion paper based on the responses received from members was circulated along with a questionnaire eliciting views of members on some of the specific issues concerning anticipated changes in the banking environment. In the meeting, which served as a brainstorming session, members gave their Vision of the future. A second meeting of the Committee was held at Chennai on 7th August 2003 to have further discussions on the common views, which emerged in the first meeting, and also to examine fresh areas to be covered in the study.

The Vision Statement prepared by the Committee is based on common thinking that crystallized at the meetings. In the Chennai meeting it was decided to form a smaller group from among the members to draft the report of the Committee. The group met thrice to finalize the draft report. The report was adopted in the final meeting of the Committee held at Mumbai.

When we talk about the future, it is necessary to have a time horizon in mind. The Committee felt, it would be rather difficult to visualize the landscape of banking industry say, 20 years hence due to the dynamic environment. While Government of India brought out India Vision 2020, the Committee is of the view that the pace of changes taking place in the banking industry and in the field of Information Technology would render any attempt to visualize the banking scenario in 2020, inconceivable. The entire financial services sector may undergo a dramatic transformation. It was, therefore, felt that we should set our goals for the near future say, for 5-10 years hence and appropriately call this exercise "Banking Industry - Vision 2010".