The column, "More transparent bank licensing" (September 20), is a well-argued piece, which calls for more transparency on the part of the Reserve Bank of India while providing licences to new banks.
Burdened with the dual roles of regulation and supervision of the financial sector, somewhere along the way, the RBI neglected a responsibility it was performing excellently till the 1980s. This responsibility related to institution-building, ensuring geographical spread of bank branches to rural and semi-urban areas and controlling the concentration of commercial bank businesses in urban and metropolitan areas. The sudden awakening and expression of intention to issue bank licences to new banks early on in the current decade did not reveal what the RBI's approach would be in this regard.
Some method came into the madness once Raghuram Rajan settled in as RBI governor. Now the unsaid policy seems to be to allow existing medium and big banks to consolidate and grow, bring as many organisations, which are doing 'banking', into the mainstream business and make them gradually follow the discipline needed and let new players in where there is a gap in outreach.
The RBI should take up a countrywide study to find out which areas are unbanked/under-banked as well as the under-banked sectors in the economy. The qualifications for new applicants may have to take into account their preparedness to meet the gaps, which the existing institutional system is unable to bridge.
M G Warrier, Mumbai
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