The discussion paper on new bank licences released by the Reserve Bank of India (RBI) may bring to the fore the problems and challenges faced by the financial sector. The issues raised in the discussion paper go much beyond the government’s intention to lay down a greater role for the private sector in banking, and seem to be aimed at promoting financial inclusion and reducing the government’s financial commitments for running banks.
As a regulatory body responsible for the health of the financial sector, RBI’s concerns go beyond the net worth of the promoter or his professional capability to run a bank. RBI’s intention to regularise and ratify parallel banks, which can conform to regulatory norms and rehabilitate some regional rural banks, as also its desire to keep the business of banking trustworthy is evident from the issues raised in the discussion paper.
What is required is a total review of banking needs and the institutional infrastructure for meeting those before implementing short-term solutions. If this is not done, the banking system will continue to ignore small borrowers.
M G Warrier, Mumbai
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