Chidambaram wants licences to go to aspirants with differentiated models

Aspirants with differentiated models of banking will be preferred while issuing new banking licences, said Finance Minister P. Chidambaram in his inaugural address at Bancon 2013 on Friday.

“I appreciate the need for different models of banking. I am happy that some of the applicants to the RBI for licence have different models. We need different kinds of banks to cater to different segments of Indian society,” he said.

The RBI is scrutinising 26 applications by private entities to run banks. The new banking licences are expected to be issued in January.

According to Chidambaram, the quality of banking products is another key challenge the industry is facing; there is a need to make models that are customer centric.

“I don’t know how established banks will shift focus and cater to the unbanked people. I sincerely hope that when new bank licences are given out, they are given to people with innovative models. It will be a pity if the new banks are clones of existing banks,” Chidambaram said.

The FM also said banks need to be strict with wilful defaulters. He assured banks that all commercial decisions taken by them will be defended.

“A poor or wrong decision does not mean a malicious decision. Each of these decisions (by banks) is based on facts and it will be dangerous to call them a crime by authorities. We strongly advise against such behaviour by the authorities,” he said.

Some green shoots

Chidambaram said the current account deficit (CAD), which was reported at $88 billion last year, will be contained below $56 billion this fiscal. Referring to the overall economic growth, Chidambaram said, “The green shoots that are visible here and there, will multiply and the economy will revive. There will be an upturn in the second half of this year and it is quite possible that the estimates made by the Reserve Bank, the PMEAC and the Government of growth between 5-5.5 per cent will be realised.”

Making a case against another interest rate hike, the Minister said the monetary policy has no impact on food inflation and the nation needs to augment supplies and improve logistics to keep food prices in check.

“It will be a pity if our country can’t grow at its potential. It has been pointed out time and time again that our potential growth rate is well over 8 per cent. I am hopeful that measures taken so far will yield results and bring us back to the high growth path,” Chidambaram said.

(This article was published on November 15, 2013)
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