Letters: Bank licences on tap | Business Standard Letters

Letters: Bank licences on tap | Business Standard Letters

Submitted version*

September 20, 2015
Bank licenses on tap
This refers to the article “More transparent bank licenses” (September
20). This is a well-argued article which calls for having more transparency in
issue of new bank licenses by RBI.
The central bank, burdened with the dual roles of regulation and
supervision of the financial sector, somewhere on the way, neglected a
responsibility which it was performing excellently well till late 1980’s. That
is the one relating to institution-building and ensuring geographical spread of
bank branch network in rural and semi-urban areas and controlling the
concentration of commercial bank business in urban and metropolitan areas. The
sudden awakening and expression of intention to issue new bank licences early
during the current decade did not reveal what approach RBI would be following  in  allowing
new banks.
Some method in madness was factored in, once the new Governor Dr
Raghuram Rajan settled down at Mint Road. Now, the unsaid policy seems to be to
allow the existing medium sized and big banks to consolidate and grow, bring as
many organisations which are doing ‘banking’ into mainstream banking business
and make them gradually follow the discipline needed in the banking business
and allow new players where there is a ‘gap in outreach’.
At this juncture, RBI may do well to take up a nation-wide study to find
out the unbanked/under-banked areas in the country and 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.
Banks are not comparable with insurance companies or mutual funds.

M G Warrier, Mumbai

*Excellently edited by BS.


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