Dr. K.A.

Goyal & Vijay Joshi

International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 18

Indian Banking Industry: Challenges And

Opportuniti
es
Dr. Krishna A. Goyal
kagoyala@gmail.com
Faculty,Shri Govind Guru, Government College,
Mohanlal Sukhadia University,
Banswara, 327001, India

Vijay Joshi
vij.joshi18@rediffmail.com
Ph.D. Scholar, Business Administration, UCCMS,
Mohanlal Sukhadia University,
Udaipur, 313001, India.

Abstract
The banking industry in India has a huge canvas of his
tory, which covers the traditional banking
practices from the time of Britishers to the reforms
period, nationalization to privatization of banks
and now increasing numbers of foreign banks in India.
Therefore, Banking in India has been
through a long journey. Banking industry in India has
also achieved a new height with the
changing times. The use of technology has brought a re

volution in the working style of the banks.

Nevertheless, the fundamental aspects of banking i.e
. trust and the confidence of the people on
the institution remain the same. The majority of the
banks are still successful in keeping with the
confidence of the shareholders as well as other stakeh
olders. However, with the changing
dynamics of banking business brings new kind of risk exp
osure.
In this paper an attempt has been made to iden
tify the general sentiments, challenges and
opportunities for the Indian Banking Industry. This
article is divided in three parts. First part
includes the introduction and general scenario of Indi
an banking industry. The second part
discusses the various challenges and opportunities face
d by Indian banking industry. Third part
concludes that urgent emphasis is required on the Ind
ian banking product and marketing
strategies in order to get sustainable competitive e
dge over the intense competition from national
and global banks.
This article is a small seed to existing branch of kno
wledge in banking industry and is useful for
bankers, strategist, policy makers and researchers.
Key words:
Rural Market, Risk Management, Global Banking, Employ
ee and Customer
Retention.

1. INTRODUCTION
In recent time, we has witnessed that the World Econo
my is passing through some intricate
circumstances as bankruptcy of banking & financial institu
tions, debt crisis in major economies of
the world and euro zone crisis. The scenario has become
very uncertain causing recession in

major economies like US and Europe. This poses some s

erious questions about the survival,
growth and maintaining the sustainable development.
However, amidst all this turmoil Indias Banking Ind
ustry has been amongst the few to maintain
resilience. The tempo of development for the Indian
banking industry has been remarkable over
the past decade. It is evident from the higher pace
of credit expansion, expanding profitability
and productivity similar to banks in developed markets,
lower incidence of non- performing
assets and focus on financial inclusion have con
tributed to making Indian banking vibrant
and strong.
I
nd
i
a
n
banks
h
a
v
e
b
e
g
un
to
r
e
v
i
s
e
t

h
e
i
r
growth approach and
r
e
e
v
a
l
u
a
t
e
the
prospects on hand to keep the economy
ro
lli
n
g
.
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 19

In this paper an attempt has been made to review va

rious challenges which are likely to be faced
by Indian banking industry.

2. HISTORICAL BACKGROUND
Bank of Hindustan was set up in 1870; it was the earli
est Indian Bank. Later, three presidency
banks under Presidency Bank's act 1876 i.e. Bank of Calcutt
a, Bank of Bombay and Bank of
Madras were set up, which laid foundation for modern
banking in India. In 1921, all presidency

banks were amalgamated to form the Imperial Bank of I

ndia. Imperial bank carried out limited
number of central banking functions prior to establish
ment of RBI. It engaged in all types of
commercial banking business except dealing in foreign
exchange.
Reserve Bank of India Act was passed in 1934 & Reserve
Bank of India (RBI) was constituted as
an apex body without major government ownership. Ban
king Regulations Act was passed in
1949. This regulation brought RBI under government
control. Under the act, RBI got wide ranging
powers for supervision & control of banks. The Act als
o vested licensing powers & the authority to
conduct inspections in RBI.
In 1955, RBI acquired control of the Imperial Bank of
India, which was renamed as State Bank of
India. In 1959, SBI took over control of eight privat
e banks floated in the erstwhile princely states,
making them as its 100% subsidiaries.
It was 1960, when RBI was empowered to force compulso
ry merger of weak banks with the
strong ones. It significantly reduced the total number
of banks from 566 in 1951 to 85 in 1969. In
July 1969, government nationalised 14 banks having de
posits of Rs. 50 crores & above. In 1980,
government acquired 6 more banks with deposits of mor
e than Rs.200 crores. Nationalisation of
banks was to make them play the role of catalytic agents
for economic growth. The Narasimha
Committee report suggested wide ranging reforms for
the banking sector in 1992 to introduce
internationally accepted banking practices. The amendmen
t of Banking Regulation Act in 1993
saw the entry of new private sector banks.
Banking industry is the back bone for growth of any econo

my. The journey of Indian Banking

Industry has faced many waves of economic crisis. Recently,
we have seen the economic crisis
of US in 2008-09 and now the European crisis. The ge
neral scenario of the world economy is
very critical.
It is the banking rules and regulation framework of I
ndia which has prevented it from the world
economic crisis. In order to understand the challenges
and opportunities of Indian Banking
Industry, first of all, we need to understand the ge
neral scenario and structure of Indian Banking
Industry.

3. GENERAL BANKING SCENARIO IN INDIA

The general banking scenario in India has become very d
ynamic now-a-days. Before preliberalization era, the picture of Indian Banking was
completely different as the Government of
India initiated measures to play an active role in th
e economic life of the nation, and the Industrial
Policy Resolution adopted by the government in 1948 en
visaged a mixed economy. This resulted
into greater involvement of the state in different
segments of the economy including banking and
finance.
The Reserve Bank of India was nationalized on January 1
, 1949 under the terms of the Reserve
Bank of India (Transfer to Public Ownership) Act, 1948
. In 1949, the Banking Regulation Act was
enacted which empowered the Reserve Bank of India (RBI
) "to regulate, control, and inspect the
banks in India." The Banking Regulation Act also provi
ded that no new bank or branch of an
existing bank could be opened without a license from th
e RBI, and no two banks could have
common directors.

Dr. K.A. Goyal & Vijay Joshi

International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 20

By the 1960s, the Indian banking industry had become an

important tool to facilitate the speed of
development of the Indian economy. The Government of
India issued an ordinance and
nationalised the 14 largest commercial banks with eff
ect from the midnight of July 19, 1969. A
second dose of nationalization of 6 more commercial ba
nks followed in 1980. The stated reason
for the nationalization was to give the government m
ore control of credit delivery. With the second
dose of nationalization, the Government of India cont
rolled around 91% of the banking business
of India. Later on, in the year 1993, the government
merged New Bank of India with Punjab
National Bank. It was the only merger between nationa
lized banks and resulted in the reduction
of the number of nationalised banks from 20 to 19. A
fter this, until the 1990s, the nationalised
banks grew at a pace of around 4%, closer to the avera
ge growth rate of the Indian economy.
In the early 1990s, the then Narasimha Rao governmen
t embarked on a policy of liberalization,
licensing a small number of private banks.
The next stage for the Indian banking has been set u
p with the proposed relaxation in the norms
for Foreign Direct Investment, where all Foreign Inv
estors in banks may be given voting rights
which could exceed the present cap of 10%, at present i
t has gone up to 74% with some
restrictions.
The new policy shook the Banking sector in India complete
ly. Bankers, till this time, were used to
the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home
at 4) of functioning. The new wave

ushered in a modern outlook and tech-savvy methods of

working for traditional banks. All this led
to the retail boom in India. People not just demand
ed more from their banks but also received
more.

4. STRUCTURE OF INDIAN BANKING INDUSTRY

Banking Industry in India functions under the sunshad
e of Reserve Bank of India - the regulatory,
central bank. Banking Industry mainly consists of:

Commercial Banks

Co-operative Banks
The commercial banking structure in India consists of: Sch
eduled Commercial Banks
Unscheduled Bank. Scheduled commercial Banks constitute t
hose banks which have been
included in the Second Schedule of Reserve Bank of Indi
a (RBI) Act, 1934.
RBI in turn includes only those banks in this schedule
which satisfy the criteria laid down vide
section 42 (60) of the Act. Some co-operative banks are
scheduled commercial banks although
not all co-operative banks are. Being a part of the s
econd schedule confers some benefits to the
bank in terms of access to accommodation by RBI during th
e times of liquidity constraints. At the
same time, however, this status also subjects the ban
k certain conditions and obligation towards
the reserve regulations of RBI.
For the purpose of assessment of performance of banks,
the Reserve Bank of India categorise
them as public sector banks, old private sector banks, n
ew private sector banks and foreign
banks.
Dr. K.A. Goyal & Vijay Joshi

International Journal of Business Research and Manageme

nt (IJBRM), Volume (3) : Issue (1) : 2012 21
FIGURE 1:
The commercial banking structure in India

S.No. Nationalized Banks

Old Private Sector
Banks
New Private Sector
Banks
Foreign Banks
1 Allahabad Bank Ltd.
Catholic Syrian Bank
Ltd. Axis Bank Ltd.
Abu Dhabi
Commercial Bank
2 Andhra Bank Ltd.
City Union Bank Ltd.
Development Credit
Bank Ltd.
American Express
Bank
3 Bank of Baroda Ltd.
Dhanalakshmi Bank
Ltd. HDFC Bank Ltd.
Bank Internasional
Indonesia
4 Bank of India Ltd.
Federal Bank Ltd ICICI Bank Ltd. Bank of America NA
5
Bank of Maharashtra
Ltd. ING Vysya Bank Ltd. IndusInd Bank Ltd. Bank of
Ceylon
6 Canara Bank Ltd.
Jammu and Kashmir
Bank Ltd.
Kotak Mahindra Bank
Ltd.

Bank of Nova Scotia

(Scotia Bank)
7
Central Bank of India
Ltd. Karnataka Bank Ltd. Yes Bank Ltd.
Bank of Tokyo
Mitsubishi UFJ
8
Corporation Bank
Ltd. Karur Vysya Bank Ltd.
Barclays Bank PLC
9 Dena Bank Ltd.
Lakshmi Vilas Bank Ltd.
BNP Paribas
10 IDBI Bank Ltd.
Nainital Bank Ltd.
Calyon Bank
11 Indian Bank Ltd.
Ratnakar Bank Ltd.
Chinatrust Commercial
Bank
12
Indian Overseas
Bank Ltd.
SBI Commercial and
International Bank Ltd.
Citibank N.A.
13
Oriental Bank of
Commerce Ltd. South Indian Bank Ltd.
DBS Bank
14
Punjab and Sind
Bank Ltd.
Ta
milnad Mercantile

Bank Ltd.
Deutsche Bank AG
15
Punjab National Bank
Ltd.
HSBC

Reserve Bank of India

Bank
Financial Institution
Scheduled
Commercial
banks
Co
operative
credit
institutions
Public Sector
banks
Private
Sector banks
Foreign
banks
Regional
Rural Banks
Urban
Cooperative
Banks
Rural Cooperative
Credit Institutions

All India
Financial
Institution
State Level

Institution
Other
Institution
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 22

16 Syndicate Bank Ltd.

JPMorgan Chase
Bank
17 UCO Bank Ltd.
Krung Thai Bank
18
Union Bank of India
Ltd.
Mashreq Bank psc
19
United Bank of India
Ltd.
Mizuho Corporate
Bank
20 Vijaya Bank Ltd.
Royal Bank of
Scotland
21
State Bank of Bikaner
and Jaipur Ltd.
Shinhan Bank
22
State Bank of
Hyderabad Ltd.
Socit Gnrale
23
State Bank of India
Ltd.
Sonali Bank
24

State Bank of My
sore
Ltd.
Standard Chartered
Bank
25
State Bank of
Patiyala Ltd.
State Bank of
Mauritius
26
State Bank
of
Travankore
UBS
27
VTB
Source: http://finance.indiamart.com/investment_in_in
dia/scheduled_commercial_banks.html
TABLE 1:
Scheduled Commercial Banks Operating In India

5. CHALLENGES FACED BY INDIAN BANKING

INDUSTRY
Developing countries like India, still has a huge num
ber of people who do not have access to
banking services due to scattered and fragmented locati
ons. But if we talk about those people
who are availing banking services, their expectations
are raising as the level of services are
increasing due to the emergence of Information Technol
ogy and competition. Since, foreign
banks are playing in Indian market, the number of serv
ices offered has increased and banks have
laid emphasis on meeting the customer expectations.
Now, the existing situation has created various challe
nges and opportunity for Indian Commercial

Banks. In order to encounter the general scenario of b

anking industry we need to understand the
challenges and opportunities lying with banking indu
stry of India.
5.1 Rural Market
Banking in India is generally fairly mature in terms o
f supply, product range and reach, even
though reach in rural India still remains a challenge
for the private sector and foreign banks. In
terms of quality of assets and capital adequacy, Indian
banks are considered to have clean,
strong and transparent balance sheets relative to ot
her banks in comparable economies in its
region.
Consequently, we have seen some examples of inorgani
c growth strategy adopted by some
nationalized and private sector banks to face upcoming ch
allenges in banking industry of India.
For example recently, ICICI Bank Ltd. merged the Bank
of Rajasthan Ltd. in order to increase its
reach in rural market and market share significantly. S
tate Bank of India (SBI), the largest public
sector bank in India has also adopted the same strate
gy to retain its position. It is in the process
of acquiring its associates. Recently, SBI has merged S
tate Bank of Indore in 2010.
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 23

5.1 Management of Risks

The growing competition increases the competitiveness
among banks. But, existing global
banking scenario is seriously posing threats for India
n banking industry. We have already
witnessed the bankruptcy of some foreign banks.
According to Shrieves (1992), there is a positive ass
ociation between changes in risk and capital.

Research studied the large sample of banks and result

s reveal that regulation was partially
effective during the period covered. Moreover, it was
concluded that changes in bank capital over
the period studied was risk-based [1].
Wolgast, (2001) studied the Merger and acquisition a
ctivity among financial firms. The author
focused bank supervisors in context with success of merger
s, risk management, financial system
stability and market liquidity. The study concluded that
large institutions are able to maintain a
superior level of risk management [2].
Al-Tamimi and Al-Mazrooei (2007) examined the risk ma
nagement practices and techniques in
dealing with different types of risk. Moreover, they co
mpared risk management practices between
the two sets of banks. The study found the three most
important types of risk i.e. commercial
banks foreign exchange risk, followed by credit risk, and
operating risk [3].
Sensarma and Jayadev (2009) used selected accounting rati
os as risk management variables
and attempted to gauge the overall risk management ca
pability of banks. They used multivariate
statistical techniques to summarize these accounting rat
ios. Moreover, the paper also analyzed
the impact of these risk management scores on stock ret
urns through regression analysis.
Researchers found that Indian banks' risk management ca
pabilities have been improving over
time. Returns on the banks' stocks appeared to be sens
itive to risk management capability of
banks. The study suggest that banks want to enhance s
hareholder wealth will have to focus on
successfully managing various risks [4].
5.3 Growth of Banking

Zhao, Casu and Ferrari (2008) used a balanced panel d

ata set covering the period of 1992-2004
and employing a Data Envelopment Analysis (DEA)-based
Malmquist Total Factor Productivity
(TFP) index. The empirical study indicated that, after
an initial adjustment phase, the Indian
banking industry experienced sustained productivity grow
th, which was driven mainly by
technological progress. Banks' ownership structure does
not seem to matter as much as
increased competition in TFP growth. Foreign banks app
ear to have acted as technological
innovators when competition increased, which added to
the competitive pressure in the banking
market. Finally, our results also indicate an increase
in risk-taking behaviour, along with the whole
deregulation process [5].
It was found in the study of Goyal and Joshi (2011a) t
hat small and local banks face difficulty in
bearing the impact of global economy therefore, they ne
ed support and it is one of the reasons for
merger. Some private banks used mergers as a strategi
c tool for expanding their horizons. There
is huge potential in rural markets of India, which is
not yet explored by the major banks. Therefore
ICICI Bank Ltd. has used mergers as their expansion
strategy in rural market. They are
successful in making their presence in rural India. It
strengthens their network across
geographical boundary, improves customer base and marke
t share [6].
5.4 Market Discipline and Transparency
According to Fernando (2011) transparency and disclosure
norms as part of internationally
accepted corporate governance practices are assuming great
er importance in the emerging

environment. Banks are expected to be more responsive

and accountable to the investors. Banks
have to disclose in their balance sheets a plethora o
f information on the maturity profiles of assets
and liabilities, lending to sensitive sectors, movem
ents in NPAs, capital, provisions, shareholdings
of the government, value of investment in India and
abroad, operating and profitability indicators,
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 24

the total investments made in the equity share, unit

s of mutual funds, bonds, debentures,
aggregate advances against shares and so on [7].
5.5 Human Resource Management
Gelade and Ivery (2003) examined relationships betw
een human resource management (HRM),
work climate, and organizational performance in the bra
nch network of a retail bank. Significant
correlations were found between work climate, human re
source practices, and business
performance. The results showed that the correlations
between climate and performance cannot
be explained by their common dependence on HRM factors,
and that the data are consistent with
a mediation model in which the effects of HRM practice
s on business performance are partially
mediated by work climate [8].
Bartel (2004) studied the relationship between huma
n resource management and establishment
performance of employees on the manufacturing sector. U
sing a unique longitudinal dataset
collected through site visits to branch operations of
a large bank, the author extends his research
to the service sector. Because branch managers had consid
erable discretion in managing their
operations and employees, the HRM environment could v

ary across branches. Site visits

provided specific examples of managerial practices that
affected branch performance. An
analysis of responses to the banks employee attitude s
urvey that controls for unobserved branch
and manager characteristics shows a positive relations
hip between branch performance and
employees satisfaction with the quality of performan
ce evaluation, feedback, and recognition at
the branchthe incentives dimension of a high-perfor
mance work system. In some fixed effects
specifications, satisfaction with the quality of commun
ications at the branch was also important
[9].
5.6 Global Banking
It is practically and fundamentally impossible for any n
ation to exclude itself from world economy.
Therefore, for sustainable development, one has to
adopt integration process in the form of
liberalization and globalization as India spread the
red carpet for foreign firms in 1991. The impact
of globalization becomes challenges for the domestic en
terprises as they are bound to compete
with global players.
If we look at the Indian Banking Industry, then we fin
d that there are 36 foreign banks operating in
India, which becomes a major challenge for Nationalize
d and private sector banks. These foreign
banks are large in size, technically advanced and having
presence in global market, which gives
more and better options and services to Indian trade
rs.
5.7 Financial Inclusion
Financial inclusion has become a necessity in todays b
usiness environment. Whatever is
produced by business houses, that has to be under the ch

eck from various perspectives like

environmental concerns, corporate governance, social and
ethical issues. Apart from it to bridge
the gap between rich and poor, the poor people of th
e country should be given proper attention to
improve their economic condition.
Dev (2006) stated that financial inclusion is signifi
cant from the point of view of living conditions of
poor people, farmers, rural non-farm enterprises an
d other vulnerable groups. Financial inclusion,
in terms of access to credit from formal institutions
to various social groups. Apart from formal
banking institutions, which should look at inclusion b
oth as a business opportunity and social
responsibility, the author conclude that role of the
self-help group movement and microfinance
institutions is important to improve financial inclu
sion. The study study suggested that this
requires new regulatory procedures and de-politicisat
ion of the financial system [10].
5.8 Employees Retention
The banking industry has transformed rapidly in the la
st ten years, shifting from transactional and
customer service-oriented to an increasingly aggressiv
e environment, where competition for
revenue is on top priority. Long-time banking employ
ees are becoming disenchanted with the
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 25

industry and are often resistant to perform up to ne

w expectations. The diminishing employee
morale results in decreased revenue. Due to the intr
insically close ties between staff and clients,
losing those employees completely can mean the loss of
valuable customer relationships. The
retail banking industry is concerned about employee rete

ntion from all levels: from tellers to

executives to customer service representatives because
competition is always moving in to hire
them away.
The competition to retain key employees is intense. Top
-level executives and HR departments
spend large amounts of time, effort, and money trying
to figure out how to keep their people from
leaving.
Sekaran, U. (1989) studied a sample of 267 bank emplo
yees, this study traced the paths to the
job satisfaction of employees at the workplace through
the quality of life factors of job involvement
and sense of competence. Results indicated that person
al, job, and organizational climate factors
influenced the ego investment or job involvement of
people in their jobs, which in turn influenced
the intra-psychic reward of sense of competence that the
y experienced, which then directly
influenced employees' job satisfaction [11].
Mitchell, Holtom, Lee and Graske (2001) asserted in th
eir study that people often leave for
reasons unrelated to their jobs. In many cases, unexpect
ed events or shocks are the cause.
Employees also often stay because of attachments and th
eir sense of fit, both on the job and in
their community [12].
Saxena and Monika (2010) studied a case of 5 companies
out of 1000 organizations and 8752
respondents surveyed across 800 cities in India by Business
Today. The survey was on nine
basic parameters like career and personal growth, compa
ny prestige, training, financial
compensation and benefits and merit based performance
evaluation. It was concluded that the
biggest challenge for organizations is that when new

employees appointed, it is difficult to merge

them in organizational culture. Each organization has i
ts own unique culture and most often,
when brought together, these cultures clash. When the
re is no retention, employees point to
issues such as identity, communication problems, human re
sources problems, ego clashes, and
intergroup conflicts, which all fall under the category
of cultural differences [13].
5.9 Customer Retention
Levesque and McDougall (1996) investigated the major
determinants of customer satisfaction
and future intentions in the retail bank sector. They
identified the determinants which include
service quality dimensions (e.g. getting it right the
first time), service features (e.g. competitive
interest rates), service problems, service recovery an
d products used. It was found, in particular,
that service problems and the banks service recovery abi
lity have a major impact on customer
satisfaction and intentions to switch [14].
Clark (1997) studied the impact of customer-employee r
elationships on customer retention rates
in a major UK retail bank. He revealed that employee
and customer perceptions of service quality
are related to customer retention rates and that emp
loyee and customer perceptions of service
quality are related to each other [15].
Clark (2002) examined the relationship between emplo
yees perceptions of organizational climate
and customer retention in a specific service setting, v
iz. a major UK retail bank. Employees
perceptions of the practices and procedures in relation
to customer care at their branch were
investigated using a case study approach. The findings
revealed that there is a relationship

between employees perceptions of organizational clima

te and customer retention at a microorganizational level. He suggested that organizationa
l climate can be subdivided into five climate
themes and that, within each climate theme, there ar
e several dimensions that are critical to
customer retention [16].
Dr. K.A. Goyal & Vijay Joshi
International Journal of Business Research and Manageme
nt (IJBRM), Volume (3) : Issue (1) : 2012 26

Hansemark and Albinsson (2004) explored how the emplo

yees of a company experience the
concepts of customer satisfaction and retention. They use
d phenomenological method, allowing
the informants own interpretations to be discovered
. Satisfaction was discussed from three
perspectives: definition of the concept, how to recogni
se when a customer is satisfied, and how to
enhance satisfaction. The informants experience perta
ining to these three categories varied, and
a total of seven ways to define, recognise or enhance
satisfaction were discovered. These were:
service, feeling, chemistry, relationship and confidence
, dialogue, complaints and retention. All
except the first two of these categories of experience
were found to enhance retention, implying
that the informants have found that strategies for
enhancing both satisfaction and retention are
similar [17]. The strongest connection between retent
ion and satisfaction strategies turned out to
be in terms of relationship and confidence.
5.10 Environmental Concerns
It is quite clear from the recently formed Copenhagen
Climate Council (CCC) that there is a
severe need for environmental awareness among all th
e countries of the world. CCC published
Thought Leadership Series on Climate Change which is

a collection of inspirational, concise and

clearly argued pieces from some of the world's most ren
owned thinkers and business leaders on
climate change. The objective of the pieces is to assi
st in enhancing the public and political
awareness of the actions that could have a significant
impact on global emissions growth and to
disseminate the message that it is time to act. The
Thought Leadership Series was aimed at
explaining and spreading awareness of the key elements
in the business and policy response to
the climate problem. The rationale for the Thought L
eadership Series was to change the focus of
people.
5.11 Social and Ethical Aspects
There are some banks, which proactively undertake the re
sponsibility to bear the social and
ethical aspects of banking. This is a challenge for comm
ercial banks to consider the these
aspects in their working. Apart from profit maximizatio
n, commercial banks are supposed to
support those organizations, which have some social co
ncerns.
Benedikter (2011) defines Social Banks as banks with a
conscience. They focus on investing in
community, providing opportunities to the disadvantag
ed, and supporting social, environmental,
and ethical agendas. Social banks try to invest their m
oney only in endeavours that promote the
greater good of society, instead of those, which gene
rate private profit just for a few. He has also
explained the main difference between mainstream ban
ks and social banks that mainstream
banks are in most cases focused solely on the principle
of profit maximization whereas, social
banking implements the triple principle of profit-pe

ople-planet [18].
Goyal and Joshi (2011b) have concluded in their study on
social and ethical aspects of Banking
Industry that Banks can project themselves as a socially
and ethically oriented organization by
disbursement of loans merely to those organizations,
which has social, ethical and environmental
concerns [19].

6. CONCLUSION
Over the years, it has been observed that clouds of t
repidation and drops of growth are two
important phenomena of market, which frequently changes
in different sets of conditions. The pre
and post liberalization era has witnessed various en
vironmental changes which directly affects
the aforesaid phenomena. It is evident that post li
beralization era has spread new colors of
growth in India, but simultaneously it has also pose
d some challenges.
This article discusses the various challenges and oppor
tunities like rural market, transparency,
customer expectations, management of risks, growth in
banking sector, human factor, global
banking, environmental concern, social, ethical issues,
employee and customer retentions. Banks
are striving to combat the competition. The competitio
n from global banks and technological
innovation has compelled the banks to rethink their po
licies and strategies.