............To be sure, the RBI corrected its mistake by deciding not to grant any further LAB licences. Seventeen years later, the central bank is close to committing the same mistake by the creation of the proposed smaller banks. Going by the draft guidelines of the RBI, the smaller banks will not be very different in mandate and operational scope compared with that of LABs.
The operations of smaller banks will “normally” be restricted to contiguous districts to give a “local feel” and culture. Any possibility of expanding the presence comes after a period of initial five years of stabilisation period. For initial three years, the smaller banks would require prior approval of the RBI. There is not much difference from LAB rules, except the fact that smaller banks can expand to districts in the adjoining states “if necessary”. But that’s a scenario one has to wait and watch to see whether it happens in reality. Now, the problem is that ........
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