Banking System Paradox

Banking system has been the backbone of Indian economy. Banking industry has seen a drastic transformation in past two and half decades with emergence of new players in the form of new generation private sector bank, payment banks, non banking financial companies. Competition among service providers has lead to sustainability issues. Balancing between business expansion, risk absorbing capacity and profitability is important. Survival of the fittest is the rule of the game. Nationalization of private banks was done to expand the service base for common masses. Since independence public sector banks have played a key role in the development and balanced growth of all sections of the society. Public sector banks were supported by a league of few old generation banks that catered the niche segments across India. Kerala is the birth place of many old generation private sector banks. Old generation banks worked in line to the practices followed by the leading public sector banks. Indian Banking Association (IBA) was formed for bringing standardization among peer players across industry. Post liberalization era has originated many new generation banks are genetically modified hybrids. New variants are designed for specific objectives of profit maximization en-cashing available opportunities. Business expansion is based on profit criteria rather than social requirements. Ideologies have differed a lot across generations. Public sector banks and new generation private sector banks are operating with diverse organizational goals. This case study highlights the comparative scenario of private sector banks with that of public sector banks to understand the market dynamics in the game of performance and survival.