FM says bank licences should go to those who are innovative

Finance minister P Chidambaram suggested that new bank licences to be awarded in January may be more likely to go to those with a plan to take banking to millions of Indians in rural areas and those who are not part of the financial system rather than aspirants looking to serve people in the cities. This may dash the hopes of some of the 26 applicants that have strong finances but don't have a credible plan to provide funding to rural India while improving the chances of those that do.

"When licences are given in January 2014, it would be a pity if it goes to the banks that are clones of present banks," Chidambaram said at the banking conference Bancon 2013 in Mumbai on Friday. "Banking licences should be given to those who come up with innovative ideas. The reality is that people in this country live in three centuries,'' he said, referring to more than half the population with no access to the financial system.

The government is keen on the new entrants furthering its goal of financial inclusion, with the last set of licences having been given a decade ago. Improving access to banking services for the vast majority of unbanked Indians is also an avowed aim of the Reserve Bank of India. Some prospective candidates had dropped out of the race because of stringent conditions. A four-member committee headed by former Reserve Bank of India governor Bimal Jalan is currently scrutinizing the applications. 

Some prospective candidates had dropped out of the race because of stringent conditions. A four-member committee headed by former Reserve Bank of India governor Bimal Jalan is currently scrutinizing the applications. The minister echoed governor RBI Raghuram Rajan when he said that differentiated licences are essential given the diverse nature of the country. "I find there is need for different kinds of banks in our country,'' said Chidambaram. 

The minister echoed governor RBI Raghuram Rajan when he said that differentiated licences are essential given the diverse nature of the country. "I find there is need for different kinds of banks in our country,'' said Chidambaram. "We need banks to cater to communities, to cater to the tribal population, to cater to the north-eastern region, for the urban poor because their needs are different.'' 

Source:-The Economic Times