ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Licences for New Banks

This has reference to the article, “New Banks: Don’t Say ‘Yes’ If You Want to Say ‘No’ ” (EPW, 10 September 2011) by T T Ram Mohan.

I fail to understand the logic of some of the issues raised by the author. According to him, the draft guidelines of RBI do not explicitly mention the objective of granting new licences, and it is not clear whether new licences will be issued for the purpose of the growth of the banking sector or financial inclusion. The RBI had distinctly mentioned in para 2.5 of the discussion paper, “The Reserve Bank is therefore considering providing licences to a limited number of new banks. A larger number of banks would f oster greater competition, and thereby reduce costs, and improve the quality of service. More importantly, it would promote financial inclusion, and ultimately support inclusive economic growth, which is a key focus of public policy.” It is very clear that the RBI is not only looking at growth and financial inclusion, it also wants banking to be more competitive and should be cost effective.

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