Indian Banking Sector Reforms and Current Status of Financial Inclusion: A T-Test Approach

Abstract

The Indian financial sector has undergone a significant structural transformation since initiation of the financial liberalization in 1990's. It brought significant changes in the Indian economy is general and financial sector in particular. This paper reveals that the banking sector in India has made significant progress in all financial indicators of performance measurement during the post liberalization period. The deposits of the banking system, banking credit and investment of the Indian banking system have been increased. The present paper first makes an effort to explain the evolution of the Indian banking industry in India. It intends to analyze the performance of the Indian banking sector after the initiation of financial liberalization and also aims to reveals the current status of financial inclusion in India. Here, the empirical result (two sample t-test) shows that during the post reform period the performance of proportion of household having life insurance fund and proportion of household having access to saving (supply side indicators of financial inclusion) is better than pre reform period. The performance of no. of commercial bank branches per 1, 000 adults is better in comparison to other demand side indicators of financial inclusion in India. Now, financial inclusion is no longer a policy choice but a policy compulsion and banking sector is a key driver for financial inclusion/inclusive growth.