Reserve Bank Governor Raghuram Rajan on Friday said there is a need to check flaws in the banking system to ensure that defaulters are not let off scot-free.
“We have to check the flaws in banking system where a defaulter can not escape with impunity,” Dr. Rajan said.
The banking sector is currently struggling with high non performing assets (NPAs).
Delivering the annual Sardar Vallabhbhai Memorial Lecture at The Sardar Vallabhbhai Patel National Police Academy in Hyderabad, Dr. Rajan also called for “focus” in implementation of economic reforms and improving capacity at every level of economy and village and national infrastructure to maintain growth and check inflation.
“Our country is today facing number of challenges regarding implementation of economic reforms and we are putting it back on the right path by certain measures.
“We need to focus in implementation and improve capacity at every level of the economy. We should concentrate on village infrastructure and national infrastructure as well to keep economic growth and check inflation levels,” Dr. Rajan said.
He stressed on the role of government spending in reviving growth, especially because exports are not doing as well as in the past.
“There are certain aspects like macro stability, human capital, business environment, taxation, judiciary and allocating resources that play a key role in boosting our economy.
“We need to constitute state level co-ordination committees to monitor unregistered and illegal operators with the Chief Secretary, DGP and District Collectors in the committees.
“Today, the new mantra in the country is transparency at all levels,” Rajan was quoted as saying in a statement issued by the Academy, delivering a lecture on `Reforming India’s Economic Institutions’
Earlier, Dr. Rajan paid homage at the Police Martyrs’ Memorial.
Rajan for more use of IT by banks
The use of information technology in the Indian banking system is still quite low and the banks should use new technologies to bring down costs, Dr. Rajan said.
Speaking at the function organised by the Institute for Development and Research in Banking Technologies, Dr. Rajan said the process of setting up an IT subsidiary of RBI is currently underway.
“IT and IT usage has not penetrated into the banks as fully and as properly as we would like. The entire banks are not fully integrated in terms of IT usage such that on a daily basis it can spin out what the details of the loans are, what the performance is. It still takes time to put the stage together,” Dr. Rajan said.
Speaking about the challenges before the banking system, the Governor advised banks to make use of the information available about the customers for serving them in terms of services and designing new products.
“There is tremendous amount of information about the customer that is made available through the system ranging from their social media habits and also various kinds of products being used by them. All of this can be use to formulate better in terms of what the customer is likely to use or want and essentially to serve the consumer need,” Dr. Rajan said.
He said banks which are still using traditional systems and offering traditional products will face huge challenges in future from the modern banks.
On the cyber security and fraud prevention issues, Dr. Rajan said for small bank transactions if banks or credit card providers are willing to take the risk, then perhaps RBI may allow small value payments, which are based on direct usage of cards, without a second level of protection.
He also hoped that the Supreme Court will take a positive view on the wider usage of Aadhaar card.
“The cost structure in the banking system despite use of all the information technology is still significantly high. Why are they not coming down faster? We should use more and more technology to bring down the cost faster,” he said.
Dr. Rajan later gave away Banking Technology Awards announced by the IDRBT for the usage of technology in banking.
