(Courtesy: Business Standard. This article was originally published in
Business Standard on 03.04.2015)
The country will see many
new banks in the coming years, including a postal bank promoted by the postal
department, Reserve Bank of India (RBI) Governor Raghuram Rajan said on
Thursday.
Speaking on the occasion
of commemorating 80 years of the central bank, the governor said, “In the
coming year, we will have many new players in the banking eco-system, such as
payments banks, small finance banks and possibly a postal bank competing with existing
universal banks, regional rural banks, cooperative banks, and a variety of
non-bank finance companies.”
The department of posts
has already applied for a payments bank licence after RBI initiated the
licensing process last year. Payments banks are niche banks which will be
allowed to function with several restrictions; they will not be allowed to lend
and will have a cap on the deposit it can take from an individual. A postal
bank, if it gets a licence from RBI, will be a universal bank.
A task force under T S R
Subramanian for suggesting ways to leverage the post office network has
recommended that the government set up a holding company under the department
of posts for immediate roll-out of banking, insurance and e-commerce services
through India’s 155,000 post offices. The task force had submitted its
recommendation last December.
Rajan also said the
central bank has successfully developed a liquid government bond market, which
gave the government the confidence to think of issuing 40-year bonds. “The
rupee is truly becoming international, as foreign institutions queue up to
issue rupee-denominated bonds. New products supported by RBI, such as the
recently introduced interest rate futures contract, are doing roaring business
on exchanges,” he said.
The former chief economist
of the International Monetary Fund (IMF), however, also said the task of the
central bank is far from over, particularly so far as infrastructure financing
is concerned. He also reminded that banks already have too much exposure to
infrastructure while big corporate infrastructure players have also taken too
much debt.
“Going forward, we need to
develop new sources of risk capital so that our infrastructure needs can be
financed with a moderate amount of debt, even as we help the system
deleverage,” he said.
In his speech as the chief
guest at the function, Prime Minister Narendra Modi highlighted the need to
extend finance to the poor.
Modi urged RBI to take the
lead in encouraging financial institutions to set concrete targets for
financial inclusion over the next 20 years, to help transform the quality of
life of the poor.
“I come as a
representative of the poor, underprivileged, marginalised and tribals; I am one
among them; I seek on their behalf and trust you will not disappoint me,” Modi
said.
The Prime Minister also
downplayed any tension between the central bank and the government over several
recent proposals, including shifting of the debt management function from RBI
to an independent agency.
Modi said the governor
meets him once in two months and he found Rajan’s presentations simple and easy
to understand.
“What this means is that
maybe government and RBI’s thoughts are similar and this is possible because of
that. I believe that this is very necessary and I as a representative of the
government express my satisfaction on this issue,” Modi said. Modi said along
with economic and social parameters, there is a need to think of a geographical
parameter as well for financial inclusion. He said eastern India had immense
economic potential, and the banking sector should recognise and plan for this.
The Prime Minister said
the success of the Pradhan Mantri Jan Dhan Yojana and the Direct Benefit
Transfer of LPG subsidy had shown the potential of the enormous role that the
banking sector can play in ensuring financial inclusion.
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