The Reserve Bank of India did not waste any time after getting clearance from the Election Commission to announce its decision on new bank licences by giving in principle approval to two applicants – IDFC and Bandhan Financial Services.
But it took four years for the central bank to take the first decision on licensing since the proposal to set up new banks was first made in 2010.
In fact, it is 10 years since the last two banks were given licences to operate. This too had happened after an interval of 10 years.
Even if it is true that the RBI has to exercise much care and caution in awarding licences for banks, the process is much too slow and even bureaucratic.
The view that the decision should have been made after the new government is formed is not valid. It is not a political decision and came entirely within the ambit of the RBI.
But it took four years for the central bank to take the first decision on licensing since the proposal to set up new banks was first made in 2010.
In fact, it is 10 years since the last two banks were given licences to operate. This too had happened after an interval of 10 years.
Even if it is true that the RBI has to exercise much care and caution in awarding licences for banks, the process is much too slow and even bureaucratic.
The view that the decision should have been made after the new government is formed is not valid. It is not a political decision and came entirely within the ambit of the RBI.
The decision marks another new era in India’s banking history.
Though all banks, both in the public and private sectors, have grown and expanded their operations in the last many years, there is room for more players.
India is still badly under-banked with only 35 per cent of people having access to formal banking services.
Greater financial inclusion is necessary for growth and taking its benefits to larger numbers of people.
Expansion of banking to new geographies like the North East, to rural areas and to socially and economically disadvantaged sections is especially important.
This should have prompted faster action on giving fresh licences. However, things might be better in future with the central bank deciding to have a system of regular and continuous granting of licences, licensing on tap as it were, rather than one of long gaps.
India Post may be granted a licence in the near future. New banks with differentiated licensing to take specialised services to niche sectors are also likely to be set up.
Though all banks, both in the public and private sectors, have grown and expanded their operations in the last many years, there is room for more players.
India is still badly under-banked with only 35 per cent of people having access to formal banking services.
Greater financial inclusion is necessary for growth and taking its benefits to larger numbers of people.
Expansion of banking to new geographies like the North East, to rural areas and to socially and economically disadvantaged sections is especially important.
This should have prompted faster action on giving fresh licences. However, things might be better in future with the central bank deciding to have a system of regular and continuous granting of licences, licensing on tap as it were, rather than one of long gaps.
India Post may be granted a licence in the near future. New banks with differentiated licensing to take specialised services to niche sectors are also likely to be set up.
Greater competition among a larger number of banks should prompt banks to offer better services to customers.
The increasing numbers of banks and customers and the bigger financial stakes involved should lead the RBI also to lay down higher standards of customer protection and to adopt more efficient regulatory norms.
Protection of customers’ interests should be an overriding concern.
The increasing numbers of banks and customers and the bigger financial stakes involved should lead the RBI also to lay down higher standards of customer protection and to adopt more efficient regulatory norms.
Protection of customers’ interests should be an overriding concern.
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