For well over two decades, after the nationalisation of 14 larger banks in 1969, no banks have been allowed to be set up in the private sector. Progressively, over this period, public sector banks have expanded their branch network considerably and catered to the socio-economic needs of large masses of the population, especially the weaker section and those in the rural areas. The public sector banks now have 91 per cent of the total bank branches and handle 85 per cent of the total banking business in the country. While recognising the importance and the role of public sector banks, there is increasing recognition of the need to introduce greater competition which can lead to higher productivity and efficiency of the banking system. A stage has now been reached when new private sector banks may be allowed to be set up.
