Dear Friends, The Reserve Bank of India has released on its website a Discussion Paper on ‘Banking Structure in India – The Way Forward’. rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=713 The discussion paper has identified certain building blocks for re-engineering the banking structure with a view to addressing various issues such as enhancing competition, financing higher growth, providing specialized services and furthering financial inclusion. It has also emphasized the need to address the concerns arising out of such changes with a view to managing the tradeoff for ensuring financial stability. The overall thrust of the reorientation is to impart dynamism and flexibility to the evolving banking structure, while ensuring that the structure remains resilient and promotes financial stability. One of the key constituents of the discussion paper is: Small banks vs. large banks: Small local banks play an important role in the supply of credit to small enterprises and agriculture and banking services in unbanked and under-banked regions in the country. While permitting large number of small banks, however, the issues relating to their size, numbers, capital requirements, exposure norms, regulatory prescriptions, corporate governance and resolution need to be suitably addressed. To quote Shri P Chidambaram (2012) “In fact, I regret that the idea of the local area bank which was started in 1996 stopped after first three licences were given. I think there is place for a local area bank for serving people of the region, local area, drawing strength from those people and serving those people” To quote the Reserve Bank of India Governor Raghuram Rajan from his 2008 work ‘Financial sector reforms in India: Why? Why Now? How?’, “Allow more small banks: Higher risk is the price we will have to pay for more growth and inclusion. Excessive risk aversion imposed on the regulatory system will only hold us all back.” While there already exists diverse institutional types within the banking architecture such as the commercial banks, cooperatives and RRBs, views are sought from the members on – · Whether there is a need for a new category of small finance banks, their viability and their unique selling proposition in the context of advancing the financial inclusion agenda ACCESS-ASSIST proposes to host a stakeholder consultation focused on “Small Finance Banks” - in the context of Reserve Bank of India‘s discussion paper. Prior to the consultation, we wish to seek views from a wide range of stakeholders on the SE-MF platform on the subject of “Small Finance Banks”. The deliberations of this roundtable and the responses received on this query shall lead to joint representation to Reserve Bank of India. All information shared by the community members would be duly acknowledged. Thanks and Regards, Vipin Sharma ACCESS Development Services New Delhi
Posted on: Mon, 09 Sep 2013 13:26:13 +0000
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