As per a discussion paper recently circulated by the RBI, the country should have a four tier banking structure. The third and fourth tiers should cover the multi-state urban cooperative banks and general cooperative banks respectively.
The apex bank seems to be toying with the idea of expanding the banking sector as it views the present stop and go licensing policy as wholly inappropriate in the changed situation. It takes the view that growth in the country’s economy needs a matching growth in the banking sector.
The apex bank has offered a slew of suggestions in the paper titled ‘banking structure in India–the way forward’.
The RBI says giving licences once in a while gives rise to artificial scarcity causing a mad scramble to acquire licences. Stringent norms should be ruthlessly enforced so that only deserving aspirants could get permits, the RBI paper suggests.
Continuous authorization should be adopted as a policy for the domestic applicants as well as is presently the case with the foreign entities and thus a healthy expansion of the banking sector be achieved, argues the paper.
Following the nationalization of banks in 1969, RBI first allowed private banks to set up shop in 1993.India’s largest private banks ICICI and bank HDFC started then. The last permits for new banks were issued in 2004, when Yes Bank and Kotak Mahindra Bank were established.
