Mangalore, Feb. 18: Former Deputy Governor of Reserve Bank of India Ms Usha Thorat has observed that the experience of the RBI over the past 17 years has been that banks promoted by individuals, though banking professionals, either failed or merged with other banks or had muted growth. She said only those banks that had adequate experience in broad financial sector, financial resources, and trustworthy people, and strong and competent managerial support, could withstand the rigorous demands of promoting and managing a bank. Drawing the attention to the RBI's August 2010 discussion paper on licensing of new banks, Ms Thorat, who is also Director of Centre for Advanced Financial Research and Learning, said when financial sector reforms were initiated in India in the early nineties, guidelines for licensing of new banks in the private sector were issued in January 1993 and subsequently revised in January 2001. The objective was to instil greater competition in the banking system to increase productivity and efficiency. She said the revised 2001 guidelines, by and large, were still cautious in nature. Large industrial houses were not permitted to promote new banks. Under the policy, 10 new banks were set up in the private sector after the 1993 guidelines and two new banks after the 2001 revised guidelines. Out of these, seven banks have survived, of which, four have been promoted by financial institutions, she said.
HBL
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