Finance Minister T.M.Thomas Isaac has called upon the banking regulator to exercise greater caution in sanctioning licences to new private banks. He was addressing a discussion on ‘licensing new private banks’, organised by Dhanlaxmi Bank here on Friday.

The increase in foreign direct investment in the banking sector in Third World countries had resulted in concentration and not competition. The way the competition is introduced by the regulator will be significant.

It was admirable that the investors were protected when compulsory mergers were initiated in the banking sector. The moot question was whether the promoters were booked for the lapses, he said, citing the instance of the collapse of the Kerala based Pala Central Bank, five decades ago.

Expressing reservations over the realisation of the stated objective of financial inclusion in the reforms, he said the increase in rural credit in the post liberalisation era had not been satisfactory. While the State government was not against consolidation in the banking sector, it was opposed to a takeover of the State Bank of Travancore because such a move would harm the latter’s heritage and link to Kerala.