The Hindu : Opinion / Editorial : Don’t lower your guard#.USq0kiMixNE.blogger

The Hindu : Opinion / Editorial : Don’t lower your guard#.USq0kiMixNE.blogger
Ideal situation in which regulators and supervisors can function with autonomy within the legislative mandate does not exist today. GOI through Finance Ministry has been pulling and pushing RBI ever since the idea of new bank licenses got momentum a couple of years back. RBI had limited options. One, rush through the formalities and give half a dozen bank licenses to those who could ‘manage’ them in the given dispensation. Two, go through some semblance of rational procedures and buy some time when the central bank could convince GOI about the dangers in giving banks to ‘manipulators’. Three, convince GOI that financial sector reforms and consolidation/overhaul of existing banks was a priority and there was no immediate purposes that will be served by allowing new banks. Now, it seems RBI is going for a fourth option, namely, accept applications from all, give licenses to some under pressure, some others whom RBI consider genuine aspirants and bring to the discipline of banking yet others who are already doing several things which normally banks are expected to do. It will be a tough job for the banking industry to come out of the present mess.


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