RBI has issued guidelines/conditions for new private sector banks. The conditions are very stiff. All news papers and channels have hailed the move. The existing private banks cater to the needs of the upper middle class and above category while public sector banks serve poor Indians. RBI should also stipulate one more condition that these new private sector banks shall maintain a separate banking entity for at least 10 years from the date of business commencement. From the list of old private sector banks, many names—Times Bank, Centurian Bank, Bank of Punjab—are missing. Because of irregularities, Global Trust Bank was merged with a public sector bank to protect depositors' interest. This shows that private banks do not necessarily mean efficiency. Efficiency in service is different from efficiency in banking operations, particularly advances/loans recovery. Money means problems, whether it is shortage or excess.
- Sudhir K Bhave, Mumbai (FE)
1 comment:
At the risk of repetition, one is compelled to observe that financial sector reforms should have preceded entry of new entities to commence banking business. Unfortunately, policy is tailor-made to suit the whims and fancies of certain individuals or to satisfy some ‘commercial’ interests external to banking. Banking sector in India has survived several threats only because RBI could, over time, through tough prudential norms for carrying on banking business and timely detection of malfunctioning and quick remedial action avert failures. Only time can tell whether the central bank will be able to function with the same effectiveness when new players with external interests infiltrate into the banking business under various pretexts. Prescribing level playing field by stipulating ‘same’ priority sector lending norms, insisting on opening rural branches, participating in ‘Financial Inclusion’ efforts may not help, if the performance of new generation private sector banks (including those failed midway, as listed here) is any guidance.
Post a Comment