Economic growth is positively related to the stage of financial development. Earlier the Indian financial system suffered from 'financial repression'. Post-1991, the liberalization process attempted to make credit institutions organizationally strong, financially viable and operationally efficient by well-sequenced reforms. These reforms led to a heightened consciousness of ownership and capital structure, enhanced competition, and increased autonomy, technological up gradation and performance change. Achievement of competitive advantage requires continued accent on efficiency, productivity, profitability and technological automation.
The major challenge for public sector banks (PSBs) relates to networking and providing core-banking solutions. Restructuring branches, downsizing manpower, reducing operational risk and transactions cost by progressively greater use of the convergence of information and communication technology (ICT), containing accretions to NPAs and optimizing efficiency have also emerged as they policy variables impacting the working of the winning formula.