A fairly developed Indian commercial banking system is in existence since the time of independence in 1947. Indian banking sector has traditionally been one of the most stringently regulated sectors in the country. Since the beginning of deregulation of the financial sector in the late 1980s banks have started operating in the six segments namely retail banking, corporate banking, investment banking, asset management, life insurance and general insurance (Deol, 2009). Indian banking system comprises of commercial and cooperative banks, out of which the commercial banks account for more than 90% of the assets of the banking system. There are two types of categories within the commercial banks. These are schedule commercial banks (which are listed in RBI Act, 1934 under schedule II) and non-scheduled commercial banks. Schedule commercial banks have been further categorized into public sector banks, private sector and foreign banks and rural and local banks. Figure 1 shows the composition of Indian banking system.
Composition of Indian banking system (adapted from Kamath, 2007)