to the vedic period, i. e., 2000 to 1400 bc. the existence of professional banking in india could be traced to the 500 bc. kautilya ’ s arthashastra, dating back to 400 bc contained references to creditors, lenders and lending rates. after the independence of the country in 1947, keeping in tune with the then economic policy, banking sector was highly regulated. in the aftermath of a balance of payment crisis situation in 1991 and with the advent of economic reforms india embarked upon financial sector liberalization in a phased manner. banking industry was deregulated by way of allowing entry of new private sector banks ; ten new private indian banks were set up in 1993, followed by two banks in 2003. other notable features towards deregulation of banking sector included allowing 74 % foreign investment in private sector banks, doing away with licensing of branches of domestic scheduled commercial banks in a phased manner, deregulation of interest rates, widening and deepening of financial markets, etc. 4. indian banking sector comprises of different types of institutions to cater to the divergent banking needs of various sectors of the economy. there are typical commercial banks which operate on all india basis. there are government owned banks, privately owned banks and foreign owned banks. there are also small banks with limited areas of operation. credit cooperatives were created to cater to the credit, processing and marketing needs of small and marginal farmers organised on cooperative lines. cooperatives expanded also in bis central bankers ’ speeches urban and semi - urban areas in the form of urban cooperative banks to meet the banking and credit requirements of people with smaller means. regional rural banks were created to bring together the positive features of credit cooperatives and commercial banks and specifically address credit needs of backward sections in rural areas. further, there was an experiment of establishing local area banks, albeit on a smaller scale, to bridge the gap in credit availability and strengthen the institutional credit framework in the rural and semi - urban areas. notwithstanding the development of various types of banks, indian banking sector is yet to meet the desired banking penetration and inclusion as witnessed in most advanced and some of the emerging economies. 5. a cross - country comparison using the world bank financial sector database with several other economies, which have bank - dominated financial systems, reveals that banking sector in india is yet to match the size and outreach of the banking sector as prevailing in various other comparable economies. according to this world bank report, 1 india has around 11 atms and nearly 11 bank

branches per 100, 000 people as compared to 119 and 47 in brazil ; 182 and 38 in russia ; 38 and 8 in china ; 60 and 10 in south africa ; 58 and 10 in singapore ; 124 and 24 in uk as against the world average of 34 atms and 12 branches per 100, 000 people. but by other matrices such as atms / gdp, we are probably better. 6. structural changes in the banking sector have been periodically examined by various expert committees in india. the committees favoured consolidation in the indian banking structure to create well - capitalised, automated and technology - oriented banks through mergers and acquisitions ; fostering competition in the banking structure through permitting more private sector banks ; setting up of small banks with local character to cater to the requirements of rural and unorganised sectors ; more active foreign banks participation ; strengthening of the existing structure through enhancing appropriate risk management capabilities ; and putting in place legal, insurance, resolution and prudential measures to enable the banking structure to discharge its core functions in an efficient and inclusive manner. 7. in india, the universal banking model is followed. as regards the structure of universal banks, the conglomerate structure is bank - led, i. e., banks themselves are holding companies which operate certain businesses through subsidiaries, joint ventures and affiliates. the general principle in this regard is that para - banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary / joint venture / associate. activities such as insurance, stock broking, asset management, asset reconstruction, venture capital funding and infrastructure financing can be undertaken only outside the bank. lending activities must be conducted from inside the bank. investment banking services are provided by the banks as an in - house departmental activity or through subsidiary. however, limits on equity investments, by a bank in a subsidiary company, or a financial services company including financial institutions, stock and other exchanges, depositories, etc., which is not a subsidiary restrict expansion of investment banking services and insurance business by the universal banks. consequently, india does not have large investment banking and insurance activity within the banking groups. 8. some countries have a differentiated bank licensing regime where differentiated licenses are issued specifically outlining the activities that the licensed entity can undertake. the criterion for differentiation for the purposes of issuing differentiated licenses could be on account of capital conditions, as is practiced in indonesia or to the activity as is the case in