Impact of Private Sector Banks on Public Sector Banks

Banks are basically service-rendering institutions. The existence and success of banks depend on their ability to meet the various needs and wants of the customers. The new millennium has brought with it challenges as well as opportunities in various fields of economic activities including banking. The banking sector in India has undergone several changes in the areas of prudential, regulatory, disclosure and supervisory norms. The financial reforms launched during the early 1990s have dramatically changed the banking scenario in the country. New prudential norms, capital adequacy prescriptions, identification of bad debts, provision requirements etc. were enforced and interest rates were deregulated. As a result of these reforms, new private sector banks were allowed entry into the market.
Many of these new private sector banks have brought them state-of-the-art technology and lean structures. These new private sector banks have built a wide network of branches, set superior standards in productivity, they introduced global best practices and more importantly they have built durable competencies by attracting the best manpower, and creating strong brand image in the financial market within a short span of time. This forced the old private sector banks to respond to the new challenges with aggressive restructuring measures. On the other hand, some of the old private banks have not introduced innovative services, not set the superior standards in productivity and even not shown their competencies so all of that they given indirect benefit to new private sector banks. This research mainly focuses on the impact of the entry of these new private sector banks on the old private sector banks in Indian banking sector.
The Indian Banking Sector: A Snapshot
India is the largest country in South Asia with a huge financial systems characterized by variety of institutions and instruments. The Indian financial sector was well developed even before political independence of