The Hindu Business Line : Industrial houses, NBFCs pitch for bank licences

The Hindu Business Line : Industrial houses, NBFCs pitch for bank licences

In the near two decades of financial sector reforms in India, the major focus was on the banking system. While a major part of the ills in the system was attributed to the PSBs, the real issue was that of governance. Private sector banks simply followed the elder brothers and the system went on sustaining on false balance sheets. Several changes were made by the Govt as also the RBI to bring in a highly competitive level playing field among different types of banks. In the process, the PSBs were again the major beneficiaries.

During the late years of the previous decade/century, NBFCs played havoc while the banks were busy cleaning their balance sheets. Dereglation of interest rates and delicencing seem to have lead to mushrooming of NBFCs in India, when Govt / RBI appointed Vasudev Committee to set right the matters. Besides, Self Regulatory Organisations (SROs) like FDIC, AMFI, AMBI, etc have also put in their best efforts to remove the stigma on the NBFCs working. Today, a clear, transparent, efficient and highly competitive level playing field has emerged among all the participants of the Financial System. Interesting development is that RBI policy of inviting more foreign banks between 2005 and 2010 has not attracted many.

What started with Rs. 100 crores as capital required for a new bank to be set up in early years of reforms, was raised to Rs. 300 crores. Besides, the concept of Capital Adequacy Ratio (CAR) was introduced for all types of players on the international BIS standards. Now, CII proposing that minimum capital for new banks to be at Rs 1,000 crores is a welcome development.