As an economy develops, it moves from specialising in agriculture to manufacturing and then to services.

With the Indian economy reaching a growth trajectory of 8-9% and targeting a sustained double digit growth in the next decade, the banking and insurance industry also has undergone the much needed makeover in the 2001-10 decade .

The banking industry has seen many significant trends and developments. Besides fulfilling its basic function of accepting deposits and providing credit, the industry has also become a partner in national schemes and programmes aimed at improving people’s lives.

With rising productivity and economies of scale, public sector banks led by the State Bank of India (SBI) which control 80 % the of market adopted technology to survive the private sector onslaught.

The new generation private banks have grown fast, with ICICI Bank emerging as the second largest bank in the country.

Thanks to strong regulatory push, the banking industry witnessed trends like low interest regime fueling a retail credit boom in general and housing finance in particular. For the first time, a home buyer could avail borrow at below 8% compared with 15-16% before 2000.

Another achievement for the banking industry has been the drastic fall in the share of non performing assets (NPAs), or bad loans, from 7-8% to 2% during the decade.

Though the hotly-debated large-scale banking consolidation is yet to materialise, financial inclusion is the industry’s buzzword these days.

Currently, just about 45 % of the Indian population has access to bank accounts, and there is just one bank branch for every 16,000 people. The number of branches per lakh of population stood at 6.33 in March 2010 compared to 25-45 in developed countries. The low reach of banks, the fact that nearly 30 million people are being added to India’s middle income group each year and the growing affluence in tier II, III towns and rural areas reflect the growth potential of the industry.

Initiatives like the Unique Identification Document (UID) project and introduction of base rate in place of benchmark prime lending rates by the Reserve Bank of India(RBI) have added new dimensions.

Today not only most of the global financial conglomerates are rushing to be a part of the India growth story, but also Indian banks are spreading wings globally. The new decade promises to be an even more exciting one for the banking industry.

The other part of the financial services, the insurance industry too has grown in leaps and bounds after it was opened to the private sector in 2000.

From four and eight players in life and non-life insurance respectively in 2000, today India has 23 life and 24 non-life insurance companies. The industry is estimated to hit the $ 1 trillion mark by 2030.

Detariffing and unit linked insurance plans (Ulips), which contribute almost 80-90 % of the incremental life insurance premium, proved to be the game-changers. The two regulators, Irda and Sebi fought over regulation of Ulips.

With 17% branches of insurance companies in the semi-urban and rural sector, the industry has also worked on financial inclusion by channeling domestic savings into segments such as infrastructure and booming capital markets.

There are still 600 million Indians who are uninsured. The challenge is to devise market-driven and innovative products that are affordable. It is also time to give equal importance to distribution and after-sales service. Indian insurance is at the brink of an exciting journey.