CONCENTRATION AND COMPETITION IN THE INDIAN BANKING SECTOR

Abstract

The banking industry in India is developing, particularly in the wake of recent changes. The Indian banking sector was privatised as a result of reforms that reduced the stringency of entrance requirements and deregulate interest rates. The transformation of financial services and consumer banking has been spearheaded by private banks, both domestic and international, which have been at the forefront of using the same technology. The way that banking consumers bank has been transformed by technology. In order to achieve a dominant position in the Indian market for their goods, private banks have aggressively priced and advertised such items. Increased levels of competition have likely been a driving force behind industry consolidation, as seen by recent mergers, amalgamations, and rationalisations in both the public and private sectors. The majority of research on banking competition also investigate the degree to which a small number of large banks dominate the industry. The approach is being used in the current investigation to investigate the concentration levels of each bank group. An enquiry of this kind would begin with the presumption that, although while individual banks keep their own records of tracking their own techniques of reacting to the changing environment and effect the structure of the sector as a whole, there may be fundamental variations in the competitive developments that are occuring inside distinct bank groups. The study reveals that there are competing trends in the Indian banking sector. Competition in the private banking sector has intensified, as seen by a long-term decline in the Nett Interest Margin (NIM), and concentration levels have risen as a result, since all bank groups have become more consolidated. Both of these may be improved via concentration. According to the findings of the research, focus makes people more competitive. It's possible that "the intra-bank group structural changes and how they affect performance may disclose what the future structure of the Indian banking sector will look like". These alterations might also be significant indicators that help determine whether or not the banking system in the Indian economy would be accepted and effective.