Competition, Consolidation and Convergence in the Indian Banking Industry- A path to $5 trillion economy

Abstract

Banking is the backbone of any economy as it has a direct bearing on financial and economic development. India is currently $3.469trillion economy. To achieve the target of a $5 trillion economy, policy changes for India must include reforms in the banking sector. Inthe banking industry, competition is crucial for maximizing efficiency. The banking sector is going through unprecedented consolidationefforts through mergers and acquisitions. Financial inclusion is aided by consolidation. This gives banks greater resources with which tolend money make investments and expand their geographical reach. The financial sector's convergence is expanding quite quickly.Financial convergence aids banks in portfolio diversification. Financial Convergence relates to all types of interfaces between financialsuppliers and the demand for all types of financial products and services. In this paper, we have specifically discussed the convergencebetween the banking sector and the insurance sector. This paper highlights various approaches to assessing competition, models ofbancassurance, benefits, and challenges of bancassurance for banks, and the expected value of the bancassurance market by 2027. This paperhas analyzed the changes in various financial ratios like Gross Non-Performing Assets (GNPA), Net Non-Performing Assets (NNPA),Common Equity Tier- 1(CET-1) etc. of Union Bank of India after merger. This paper aims to study how a more competitive,consolidated, and convergent banking industry would contribute to making India a $5 trillion economy.