The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign

banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks in
addition to cooperative credit institutions As of September 2021, the total number of ATMs in India
reached 213,145 out of which 47.5% are in rural and semi urban areas.

During FY16-FY21, bank credit increased at a CAGR of 0.62%. In 2020-2022, bank assets across
sectors increased. Total assets across the banking sector (including public and private sector banks)
increased to US$ 2.67 trillion in 2022.

Access to banking system has also improved over the years due to persistent effort from
Government to promote banking technology and promote expansion in unbanked and non-
metropolitan regions.

At the same time, India’s banking sector has remained stable despite global upheavals, thereby
retaining public confidence over the years.

Strong growth in savings amid rising disposable income levels are the major factors influencing
deposit growth.

Enhanced spending on infrastructure, speedy implementation of projects and continuation of

reforms are expected to provide further impetus to growth in the banking sector. All these factors
suggest that India’s banking sector is poised for robust growth as rapidly growing businesses will
turn to banks for their credit needs.

In recent years India has experienced a rise in fintech and microfinancing. India’s digital lending
stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion by FY23 driven by the five-fold
increase in digital disbursements.

MONETARY POLICY

The monetary policy is a policy formulated by the RBI (Reserve Bank of India) and relates to the
monetary matters of the country. The policy involves measures taken to regulate the supply of
money, availability, and cost of credit in the economy.

A few quantitative tools for monetary policy is as follows:

1. Legal Reserve Ratio:

Banks are required to keep aside a set percentage of cash reserves or RBI approved assets. LRR
includes SLR and CRR.

Cash Reserve Ratio (CRR) – Banks are required to set aside this portion in cash with the RBI.

Statutory Liquidity Ratio (SLR) – Banks are required to set aside this portion in liquid assets such as
gold or RBI approved securities such as government securities.

The current CRR and SLR is 4.50% and 18.00% respectively.

2. Bank rate:

The interest rate at which RBI lends long term funds to banks is referred to as the bank rate.

The current bank rate is 6.50%.

3. Liquidity Adjustment Facility (LAF):

It consists of repo rate and reverse repo rate:

Repo rate: Repo rate is the rate at which banks borrow from RBI on a short-term basis against a
repurchase agreement.

Reverse Repo rate: It is the rate RBI pays to banks in order to keep additional funds in RBI.

The current repo rate and reverse repo rate is 6.25% and 3.35% respectively.

FISCAL POLICY

Fiscal Policy deals with the revenue and expenditure policy of the Govt.

The following are the objectives of the Fiscal Policy:

 Higher Economic Growth
 Price Stability
 Reduction in Inequality
The above objectives are met in the following ways:
 Consumption Control – This way, the ratio of savings to income is raised.
 Raising the rate of investment.
 Taxation, infrastructure development.
 Imposition of progressive taxes.
 Exemption from the taxes provided to the vulnerable classes.
 Heavy taxation on luxury goods.
 Discouraging unearned income.