Banking

From teaching children the concept of saving small amounts and seeing it grow to inspiring trust among the vast majority of individuals, especially senior citizens, with guaranteed returns from deposits, to holding borrowers' hands in their times of need, banking has had a major role to play in the financial lives of individuals.

The banking industry has lived up to its expectations and has been a pathbreaker when it comes to customer interface and convenience by embracing the digital domain. It has adopted new forms of businesses, while maintaining its primary role of accepting deposits and lending.

Bank deposits were among the few investments that Indians made in the 1990s and early 2000s. That was also the time when banks gave handsome returns on deposits-fixed deposits (FDs) gave up to 10-11 per cent in the late 1990s and even higher in the early '90s over longer tenures. However, FD rates have touched the levels of 9 per cent later, too, during high interest rate phases. In the financial year 2023, for example, the Reserve Bank of India (RBI) revised the repo rates multiple times, taking FD rates to the 9 per cent levels for non-senior individuals.

A record number of individuals still go to banks for the safekeeping of their investments. Even seasoned equity investors trust banks to park their emergency funds.

The lending portfolio of banks has grown by leaps and bounds as borrowing has become a part of our lives. We see more and more younger people buying assets such as cars and houses as against the earlier generation when the house-buying decision was kept for the post-retirement period. The drivers for this trend have been increasing aspirations and softening interest rates compared to previous times. A research paper from RBI cites that lending rates of scheduled commercial banks had reached a peak of 20 per cent in October 1991. "However, with abundant liquidity resulting from large capital flows, interest rates after deregulation showed a distinct downward decline. By October 1997-98, lending rates declined to 14 per cent. Deposit interest rate also softened significantly from 13 per cent per annum (with maturity over three years and up to five years) in 1991-92 to 11.5-12.0 per cent," the paper said.