" Banking is as old as our civilization." Necessity is the mother of invention & as per the changing scenario, the banking sector had revolutionised from ancient times. Though it had made the life of people easier & more comfortable with the use of debit cards, net banking, credit cards & many more services available to it's customers.

But yet many flaws prevails in the banking sector of India. Non - Performing assets is a grave concern for the banking sector. As per the International Monetary Fund, around 37 per cent of total debt in India is at risk. India's largest lender State Bank of India reported a massive 67 per cent fall in net profits in the fiscal year 2015-16.

Problems faced by banking system

To resolve this, the Ministry of Finance suggested four R's in 2015-16 i.e. Recognition, recapitalization, resolution and reform. The branches in rural areas are running at high overhead costs and are suffering from great losses. The plight of banks is aggravated due to large overdue by farmers. What is more astonishing is that political parties contesting the elections promises in their agenda to cancel the overdue amount of loans on farmers, generating losses for public sector banks. The commercial banks have been facing stiff competition from non-banking financial intermediaries which offer a higher rate of interest. Also, foreign banks have registered a higher increase in deposits, indicating more reliance by Indians on foreign banks. There is a wide gap between the promises made and performance done by commercial banks. Even after reorientation, bank procedures and practices have continued to remain old and outdated. Bank officials delay the work deliberately due to bureaucracy and red-tapism. Merely sitting on chairs is a task many of them do as their day's activities. Getting a salary is the sole purpose of many of the officials. Lack of initiative and failure to take quick and prompt decisions poses yet another problem. The working of banks has been hampered by growing political pressure. Business losses, financial crisis, the dynamic environment can be some of the reasons which can be quoted for NPA's. The rise in a number of fraudulent transactions in the banking system is also a pressing concern for commercial banks.

Statistical data to support arguments

A recent study published at the IIM Bangaluru in 2016 says that in the last 3 years, Public Sector Banks (PSBs) in India have lost a total of Rs. 22,743 crore, on account of various banking frauds. A survey by FIS, a financial services technology, showed that 18 percent of Indians were victims of online banking fraud. There exists a nexus between bank officials and rich business. How can we forget to mention the names of millionaires Vijay Malala and Nirav Modi, a diamond merchant who did crores of scam and fled away!


Loan rendered to poor and farmers requires a lot of documentation and a huge amount of collateral which they can't afford. Although many branches of banks are set up in rural & backward areas to help the poor. More experienced employees, usage of latest technology is of utmost need. Online education for frauds needs to be imparted. Bureaucratisation needs to be combated on an urgent basis. Strict actions against fraudulent practices and measures needs to be taken.

Banks are at the core of any economic system. It's high time to undertake a comprehensive relook into the existing policies and structures.