Montek bats for private sector bank freedom

Says to think of halting all reforms will be a very narrow and blinkered view

Montek bats for private sector bank freedom

Emphasing that private sector banks should be given total freedom to open branches and ATMs to compete with public sector banks, Ahluwalia said all the derivative products should not be considered bad.

“You need interest rate futures to guard against interest rate risks. We should be cautious in our choice of new products, but we should keep moving forward. And we should introduce appropriate regulations to cover derivatives,” he told PTI in an interview.

At the same time he cautioned against excessive liberalistion and said “there are some banks which still argue for rapid capital account liberalisation without any restriction. We are not in favour of that. But to say that all the banking reforms should come to a halt will be a very narrow blinkered view.”

On whether bank reforms should be halted, he said, as suggested by senior bankers like K V Kamath of ICICI Bank who complemented the government and RBI for conservative banking policies that saved the day for India in the face of global financial meltdown.
Ahluwalia further said that conservatism of bankers was, a clear over-reaction. We should certainly learn from what happened in the West. They went too far in
de-regulating financial markets and introducing complex risky products, the risks of which were poorly understood...

“Our financial system is much more regulated which is why we escaped western type of crisis. But that doesn’t mean that we don’t have to do anything,” he added.

Terming the policy of treating every ATM as a branch as “excessive regulation,” he said, “I am in favour of much greater liberalisation of the bank branches side. Through competition new banking products which serve the needs of the population will be encouraged.”

Noting that there is a lot of scope for banking sector reforms, Ahluwalia said, “reforms would increase efficiency, expand reach and promote financial inclusion”.

Press Trust of India

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