....The suggestions, if implemented, will be India’s first step towards effecting far-reaching reforms and come at a time when RBI has invited companies to apply for banking licences, nine years after the apex bank last issued new licences..........
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RBI’s late recognition that further delay in comprehensive structural reforms in the financial sector may have long term adverse impact on the country’s economic development is a welcome sign. This is the right time to open a debate for a consensus in the matter and the proposed discussion paper may do just that.
The Narasimham Committee(1991) visualized a structure for Indian Banking System with ‘three or four large banks that could become international in character; eight-10 banks with a network of branches throughout the country engaged in “universal banking”; local banks whose operations would be generally confined to a specific region and rural banks (including RRBs) whose operations would be confined to the rural areas and whose business would be predominantly engaged in financing of agriculture and allied activities’.
As more than two decades have passed, there may be reason to re-evaluate a suitable model in the present context. But the relevance of structural reforms has not lost validity.
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