Political

Political environment has direct effect on all the sectors of the country including banking.
When political environment is stable and favourable it provides conducive environment for
banking sector to mobilize more funds and unfavourable environment jeopardizes the ability
to differentiate between good and bad creditor hence restricting overall lending by banks.
Poor administration, coalition government & bureaucracy creates roadblock in decision
making this creates a delay in policy making creating an uncertain environment for banks and
other financial institution. Government schemes such as Kissan credit card, Jan Dhan Yojana,
easy loans for farmers affects financial sector directly, and further FDI limit in India has been
increased to 49% in private sector banks. RBI has now allowed foreign investor to open
branches in rural area with an investment up to 74% which will give a big boost to banking
sector. Indian banking system is directly controlled by RBI, since effect of government
intervention on RBI is limited, so RBI enjoys autonomy in framing policies for banks.
Stricter regulation with respect to capital and liquidity has given Indian bank an advantage
over other countries. Other factor which affects this industry is Union. There are in total nine
union related to banking sector with an all India level presence. Suggestions given by trade
union is welcomed but in many cases undue inference from union in decision making
adversely affect banking operation

Economic factor
Though GDP growth rate is high in India during past decade compared to other economies of
the world but the low per capita income is still a matter of concern. Indian economies is in
expansion state and there is a big opportunities for growth of private sector. Make in India,
digital India and many others scheme which are being run by government has indirect effect
on financial institution. Further inflation, unemployment rate, position of rupee with respect
to foreign currencies directly effects this sector. Also monetary policies formed by RBI such
as CRR, SLR, Repo rate & reverse Repo rate defines liquidity of banks and hence is directly
related to lending power of bank and therefore has a strong influence.

Socio cultural factor

The change in lifestyle of people specially in urban working population is providing huge
opportunities for lending institutions. India has been historically a debit oriented market but is
slowly shifting to a credit oriented one. Further due to government schemes literacy rate in
India has improved which has led to shift in credit system from unorganised lending to
organised financial institution which in turn has benefited both customers and banks. Bank
today now has more penetration and big customer base. Penetration for private sector bank is
still a problem and they are mainly concentrated in urban areas. Indian population is growing
this will add more and more number of people looking for financial institution providing
opportunities for government as well as private bank.

Technological factor
Technological advancement especially internet has changed banking system, most of the
manual jobs has been replaced by set of networked computers. This has improved operations
efficiency of banks also dependency on human work force has reduced. Banking system has
become more transparent and customer relation has also improved. Internet banking, Mobile
banking, ATM , Passbook printing machine has enabled consumer to conduct day to day
banking operation without actually visiting a branch which has ultimately has duel benefit.
Due to coming up of debit and credit has cashless transaction has increased manifold but
banks today have to invest in improving their security and making this system more efficient
Legal factor:
Banking Regulation Act was enacted empowered RBI to regulate, control and inspect bank in
India. By virtue of this act no new branches of an existing bank could be opened without
license by RBI & no two banks can have common directors. Further Securitisation and
reconstruction of financial asset and enforcement of security interest act 2002 has enhanced
legal framework if the system. This has allowed financial institution including bank to sell
their underlying asset without involvement of court providing them a bargaining power over
defaulter. The credit information bureau was incorporated in 2000 which provides
information to consumer borrower related to credit and therefore has made more people
aware of overall banking system which in turn has increased penetration of banks in India.

Ref
Political
http://www.pmjdy.gov.in/
http://economictimes.indiatimes.com/news/economy/policy/budget-2016-government-mullshiking-fdi-cap-in-public-sector-banks-to-49/articleshow/51009550.cms
http://www.banknetindia.com/banking/0426.htm
http://www.livemint.com/Home-Page/hVTYJEt0JJpLqbSZSCg1uK/How-independent-isRBI.html

Eco
https://www.rbi.org.in/commonman/English/Scripts/Organisation.aspx
http://www.tradingeconomics.com/india/gdp-growth

Legal

www.nabard.org/pdf/India_Banking_BankingRegulationAct1949.pdf
http://www.iarc.co.in/content.php?cid=MjA=
https://www.cibil.com/
technological factor
https://www.kenresearch.com/banking-financial-services-and-insurance/banking/india-atmindustry-research-report/394-93.html
http://www.thehindubusinessline.com/money-and-banking/credit-card-penetration-remainsdismally-low/article7318930.ece
social
http://www.sociologydiscussion.com/social-change/social-changes-in-india-its-meaning-andfactors/2501
http://www.tradingeconomics.com/india/gdp-per-capita-ppp