MFIs dominate small finance bank licences | Business Standard News

MFIs dominate small finance bank licences | Business Standard News


The approval for 10 small
banks marks the fulfilment of a promise from RBI after Dr Raghuram Rajan took
over as Governor to bring more players into mainstream banking business through
granting differentiated banking licences. Two licences for universal banks were
issued in April 2014, of which Bardhaman has already commenced business in
August 2015. 11 players including Department of Posts were issued licences for
starting payment banks on August19, 2015.

A revamp of the
institutional arrangement in the financial sector was overdue since 1990’s and
was dodged for extraneous reasons. It needed a different leadership at Mint
Road for RBI to gather the courage to make new experiments despite legal and
political constraints. Instead of grumbling about poaching and cannibalisation
(referring to transfer of existing business to new entities), the existing
banks should take this as an opportunity for preparing for competition thrown
open in the banking sector and put their houses in order fast.

The MFIs and other players
who could not make it in the first batch to transform into ‘banks’ should see
this as an opportunity to change themselves by offering services and financial
products which can compete with those offered by banks.

A word about
cooperatives. NABARD should take initiative in reforming thousands of primary
cooperatives(both multi-purpose and credit) so that their clientele do not
migrate to the new banks for better service.
M G Warrier, Mumbai


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