Union Finance Minister P. Chidambaram, on Friday, suggested that the Reserve Bank of India (RBI) should not issue new banking licences to entities that clone the existing banks.
“Most banks are clones to each other. I am inclined to think that there is more cloning than differentiation… It will be sad if licences will go to entities which clone the present banks,” said Mr. Chidambaram, while inaugurating the IBA’s (Indian Banks’ Association) annual banking conference, BANCON, hosted by Bank of India, here.
“We need banks which cater to communities, we need banks which cater to people living in tribal areas, we need a different bank to cater to North East, we need banks to cater to the urban poor, we need banks that cater to farmer families and we need banks that cater to women,” he added. RBI Governor Raghuram Rajan had earlier said that the central bank would issue licences to new banks in January next.
Mr. Chidambaram said that majority of Indians were not having banking access. “The first challenge for Indian banks is to become truly universal, everyone in India, irrespective of the economic condition, should have access to banking services,” he said.
According to the Finance Minister, most human resources of the banking system are utilised for a small number of affluent customers. “Coprorates can raise funds through many channels, but it is really the small and medium enterprises, small borrowers and individuals” who are in need of access to banking channels for funds. Otherwise, “they will go to money lenders…My appeal to banks is that while adopting innovations, must focus on these customers…not only the public sector banks, but private banks also have to do this.”
The Finance Minister told bankers to hold the hands of victims of external circumstances, who are unable to repay their loans while the economy was facing a downturn. However, “be stern with wilful defaulters.” He also told bankers that as far as the government is concerned, “I assure you as long as you take decisions based on facts and circumstances available to you at that time and do it at an appropriate level and an appropriate committee or an appropriate forum and exercise your best judgement, we will defend you and stand by you.”
Economy will revive
Mr. Chidambaram said the government was committed to contain the fiscal deficit at 4.8 per cent of the gross domestic product (GDP) in the current financial year. He said the government would also bring down the widening current account deficit (CAD) to below $56 billion. He, however, said that retail inflation, especially food inflation, was a concern. The Finance Minister said the economy would revive in the second half of this financial year and record a growth rate of 5-5.5 per cent in 2013-14.
