Recently Raghuram Rajan, the Governor of the Reserve Bank of India assured banking reforms that more operational liberty would be given to foreign banks if they stick on to some stipulations. The promise made by the RBI Governor will make a significant impact on the Indian banking system because it requires more competition. A more viable banking sector will transform into financial gains and gain access to the structured finance segment for more people.
Currently, the inefficiencies of Indian banking are being put on the head of the customers in the form of elevated expenses. The increased competition in any trade will cause a drop in profit because the chances are remote in making the money easily.
However, Indian banks have made a huge profit during the previous decade, signifying that the 154 profitable banks barely drive each other. When comparing the output of Indian banks with that of the United Kingdom, it is observed that Indian customers are paying the cost for too little competition.