BFSI SECTOR IN INDIA: A JOURNEY OF GROWTH, DISRUPTION & FINANCIAL INCLUSION THROUGH FINTECH

Chapter 1: Historical Evolution of the BFSI Sector in India:

  • Indigenous banking systems & practices.
  • Introduction of modern banking institutions during the colonial era.
  • Birth of indigenous banks in the early 20th century.
  • Nationalization of banks in 1969 & its impact on inclusive growth.
  • Technological advancements & computerization in the 1980s.
  • Economic liberalization & entry of private sector banks in the 1990s.
  • Rise of insurance as a vital component of the sector.

Once upon a time, in the vast & diverse land of India, the seeds of the BFSI (Banking,Financial Services Insurance) sector were sown. The roots of this sector can be traced back to ancient times when indigenous banking systems & financial practices thrived. In those days, the community would come together to support each other’s financial needs, fostering a sense of trust & solidarity.

The first bank in India was The Madras Bank which was founded in 1683 & the Bank of Hindustan was the first Western-style commercial bank to open in India in 1770. It was the first bank in Calcutta to be managed by Europeans. It was dissolved between 1830 & 1832.

Bank of Hindustan – Sixteen Sicca Rupees
As time went by, the banking landscape in India began to evolve. During the colonial era, the Britishintroduced modern banking institutions, marking the advent of formal banking in the country. The establishment of the   Bank of Calcutta on the 2nd of June 1806 (later renamed as Bank of Bengal on 2nd Jan 1809), followed by the  Bank of Bombay & the Bank of Madras, laid the foundation for a structured banking system.

The early 20th century witnessed the birth of indigenous banks, such as Punjab National Bank & Canara Bank, which aimed to serve the needs of the Indian population. These banks were instrumental in supporting India’s growing economy & providing financial services to various sectors.

Post-independence, the Indian government recognized the significance of a robust banking system in fostering economic development ensuring financial stability. The year 1969 marked a significant milestone in the history of the banking sector in India, as the government nationalized 14 major banks, aiming to bring banking services closer to the masses & promote inclusive growth. With the nationalization of banks, the reach of banking services expanded rapidly. Branches were established in remote villages & banking facilities became accessible to the common people. The sector played a pivotal role in channeling funds to key sectors like agriculture, industry & infrastructure, contributing to the country’s overall progress.

As the Indian economy continued to grow, the banking sector embraced technological advancements. The introduction of computerization in the 1980s brought about a paradigm shift in banking operations. Manual processes gave way to automated systems, enhancing efficiency & customer service. The 1990s marked a turning point in the sector’s history with economic liberalization. The government initiated reforms to foster competition, attract foreign investments & strengthen the banking system. This led to the entry of private sector banks, which brought innovation, customer-centric services & a new wave of competition to the industry.

In the 21st century, the BFSI sector witnessed the emergence of insurance as a vital component. Insurance companies expanded their presence, offering life, health & general insurance products to meet the growing demand for risk mitigation financial protection.

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