India's banking reforms pivot from expanding competition to scaling existing firms

India’s banking landscape transformed after the 1991 Narasimhan Committee recommendations, which led to private licences for HDFC, UTI (later Axis) and later entrants like ICICI and Kotak Mahindra. These new banks leveraged technology and commercial models to build sizable deposit and loan franchises, eventually eclipsing many public-sector banks. Foreign banks such as Citibank, Standard Chartered and Deutsche Bank have sold their retail operations to domestic lenders.

While the RBI introduced small-finance and payments banks and allowed voluntary conversion to universal banks, large NBFCs have largely stayed out of banking due to regulatory costs. Recent policy has shifted toward consolidating public-sector banks and strengthening existing private institutions, with the regulator favouring scale over new entrants. Experts suggest future growth will come from mid-size banks expanding capital and possible NBFC-bank mergers rather than fresh licences.