Several significant structural reforms have been implemented in the Indian banking sector since the 1990s. It has now opened up to greater competition with the entry of new private banks and the gradual liberalization of the banking sector. The sector is currently valued at 81 trillion rupees ($1.31 trillion). According to an industry report, India is believed to have the potential to become the fifth largest banking sector in the world by 2020 and the third largest by 2025. (IBEF, 2014) India is an emerging market with a high economic growth. It is one of the largest economies in the world in terms of nominal GDP. It also ranks 3rd in terms of purchasing power parity. After liberalization and more favorable policies adopted by the Indian government, India has become a preferable banking destination in the world. This report was commissioned to examine the development of the banking sector in India. It will cover the history, followed by the structural framework of the sector and the functioning of the Central Bank of India, commercial banks, cooperative banks and other specialized banks in India. Banking services and performance of Indian banks will be discussed. At the end of the report, the current situation and prospects of the sector will also be analysed.2. History of Indian BankingThe Indian banking sector began in the 18th century. The first bank, the General Bank of India, was founded in 1786. The development path was then divided into three distinct phases: • Initial phase of Indian banks (1786 – 1969) • Nationalization of banks and reforms (1969 – 1991) • New Phase of Indian Banking System and Reforms (1991 – Present)2.1 Phase 1The General Bank of India was first established in 1786, followed by... half of the document... reason. However, the industry should take key challenges into serious consideration to prepare against surprises. The introduction of Basel III norms has forced Indian banks to bring in additional capital of Rs. 5 Lakhs Crores and the government intends to inject 90,000 Crores in state banks while maintaining majority stake to meet this new requirement. Intensifying competition and rising bad loans due to the economic slowdown and aggressive lending pose challenges, especially in terms of banks' profitability. If banks can differentiate themselves by offering more products and capitalizing on growth drivers in India, they could be in the spotlight in the near future as the Indian financial market opens up. It is optimistic that the country's banking sector will become increasingly mature and robust through consolidations and reforms all along.