Professional Documents
Culture Documents
Political Factors:
Government affects the performance of banking sector mostly by legislature and framing
policies
Indian banking sector is least affected as compared to other developed countries because of
robust policy framework of RBI
Stricter prudential regulations with respect to capital & liquidity gives India an advantage in
terms of credibility aver other countries
3.FDI Limits
The move to increase foreign direct investment limits to 49% from 20% came as a welcome
announcement for foreign players wanting to get a foothold in the Indian market by investing
in willing India partners who are starved of networth to meet CAR norms
Economic Factors:
Every year RBI declares its 6 monthly policies and accordingly the various measures and rates
are implemented which has an impact on the banking sector
The economic measures affects the banking sector to boost the economy by giving certain
concessions or facilities. If the savings are encouraged then more deposits would be
attracted towards the banks & in turn they can lend more money to the agricultural and
industrial sector, therefore booming the economy.
If the FDI limits are relaxed, then more FDI are brought in India through banking channels.
Socio-Cultural Factors:
Changing lifestyle
Increasing population
Low literacy rate as compared to developed countries.
Technological Factors:
Some of the Technological changes that have brought radical change in banking industry are:
Banking industry is directly related to the growth of the economy.Indian economy has
registered a good growth in recent years
Today service sector is contributing more than half of the Indian GDP. It takes India one step
closer to the developed economies of the world.
In regards with the service sector as the income of the people will increase lendings and
savings will increase leading to increased business for the banks.
Legal factors:
Banking Regulation Act- It was enacted in 1949, which empowered the RBI to control
regulate & inspect the banks in India. This act also provided that no new bank or branch of
an existing bank could be opened without a license from RBI.
Intervention by RBI- RBI will intervene to smooth movements in the rupee & prevent a
downward spiral in its value, but will balance this with the need to retain reserves in the
event of prolonged turbulence.