Foreign banks get RBI's wake-up call

Must play a larger role in agri, SME rather than derivative market: K C Chakrabarty

It was time foreign-headquartered banks in India did far more for the agriculture and small and medium enterprises (SME) sectors, said Reserve Bank of India deputy governor K C Chakrabarty.

Despite over 100 years of presence in India, foreign banks had done very little in this regard, he said, at a conference organised by Financial Times and YES Bank.

If agricultural targets were assigned to foreign banks, “they will understand what is the cost of animals and of the plough...they do not (at present),” he remarked.

Innovation was needed in this regard, he explained, not only for its own sake but also to enable state-owned banks to learn from their international counterparts in this regard, he said.

“We require foreign banks to bring new products, services, new structure, new innovations. I want more innovation in agriculture and SME, rather than innovation in the derivative market or innovation in cross-border financing,” said Chakrabarty. “They (foreign banks) have seen the last 150 years of history of agricultural development in Europe. Can they bring some good practices in this country, as our public sector banks are inefficient?”

Adding: “We believe it is the private banks and foreign banks which will bring a revolution in agricultural finance and SME finance.” This had happened in retail banking, as well as on the technology front, he said, where public sector banks would not have adopted new technology and taken steps.