Skip to main content

A cautious beginning

The Reserve Bank of India’s in-principle approval to two applicants, IDFC Limited and Bandhan Financial Services Ltd., to set up banks comes four years after the then Finance Minister, Pranab
Mukherjee, in a budget speech mooted the idea of licensing a few private banks. By its own admission, the RBI’s approach to this round of bank licences has been conservative, a trait that is wholly appropriate in the present context. That the process has taken a long time before the first licences were approved merely underlines the complexities involved. A High Level Advisory Committee headed by former RBI Governor Bimal Jalan recommended these two applicants out of a list of 25 applications. All of them were earlier scrutinised by the RBI to ensure their eligibility under the guidelines issued in February 2013. It is noteworthy that none of the big corporate names that figured in the list made the grade. The RBI has neatly sidestepped what has been the most controversial aspect of the new licensing norms — permitting corporates to start banks. The Reserve Bank received a number of negative responses to this proposal from both the public at large and experts. Indeed, the RBI itself was opposed to it in the beginning, and it was the pressure from the Finance Ministry, among others, that made the central bank relent.
For the two successful applicants — both of them leading non-banking finance companies — getting the in-principle approval is only the first step. They have 18 months to comply with the requirements under the guidelines and fulfil other conditions that may be imposed. They will face daunting challenges to scale up to being universal banks and compete with existing institutions. Their existing strengths — infrastructure finance for IDFC, and microfinance for Bandhan — will no doubt help but, as the top officers of the two institutions admitted, there is a great deal of work to be done soon. Expectations from them are immense. The government’s rationale for new bank licences has been to extend the geographical coverage of organised finance and to promote financial literacy and inclusion. Sceptics of the new policy who wonder what the new banks will do that the existing players under all categories cannot do, need to be answered effectively by creating a viable, tech-savvy model that is also customer-friendly. They have to reward their shareholders who have enabled them to invest at least Rs.500 crore. The RBI Governor has said that after learning from the latest exercise, it might be possible to revise guidelines so that licences can be made available on tap. Be that as it may, it is obvious that the two successful applicants have just assumed additional responsibilities — of being role models.

Comments

Popular posts from this blog

El Nino may make a comeback in 2017, but unlikely to affect southwest monsoon (downtoearth,)

In 2016, the world witnessed the strongest El Nino on record, which resulted in above average temperatures. The year experiences record-breaking heat for nine consecutive months. It had also ruined the Indian monsoon for two years. After two successive droughts in 2014 and 2015, last year witnessed erratic rainfall both in terms of geographical spread and time. Thanks to El Nino, the southwest monsoon in 2014 and 2015 witnessed a deficit of 11 and 14 per cent respectively.

While the 2016 monsoon season in India saw 97 per cent rainfall, it was far less than the 106 per cent that the India Meteorological Department (IMD) had forecast in July. The lesser-than-expected rainfall, especially in the second half of the monsoon season, has been attributed to the absence of a strong La Nina phenomenon in the equatorial Pacific Ocean that is known to help the Indian monsoon.

According to a recent forecast by the National Oceanic and Atmospheric Administration (NOAA), there’s a 50 per cent chan…

Current Affairs MCQ for UPSC Exams – 21 December 2016

Q.1- Which of the following is/are correct regarding Nirbhaya missile?

1. It is a cruise missile
2. It is hypersonic in speed
A. 1 only
B. 2 only
C. Both
D. None

Q.2- Khanjar-III is military exercise between which of the following countries?

A. India and Russia
B. Russia and China
C. India and Kyrgyzstan
D. Russia and Afghanistan

Q.3- UPI has been in news recently, what is the full form of UPI?

A. Unified Payment Interchange
B. Unified Payment Interface
C. Unified process interchange
D. Unified process interface
 .
.
.
.

.
.
.
.
.
.
.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.
.
.
Answer  1-A, 2 -C, 3-B

Indian Polity Elections (MCQ )

1. Who of the following has the responsibility of the registration of voters
a) Individual voters
b) Government
c) Election commission
d) Corporations


2. Democracy exists in India, without peoples participation and co operation democracy will fail. This implies that
a) Government should compel people to participate and cooperate with it
b) People from the government
c) People should participate and cooperate with the government
d) India should opt for the presidential system


3. Which of the following are not the functions of the election commission
1) Conduct of election for the post of the speaker and the deputy speaker, Lok sabha and the deputy chairman, Rajya sabha
2) Conduct of elections to the state legislative assemblies
3) Deciding on all doubts and disputes arising out of elections

a) 1 and 2
b) 1 and 3
c) 2 and 3
d) 2

4. Which of the following electoral systems have not been adopted for various elections in India
1) System of direct elections on the basis of adult suffrage
2…