Privatization of public bank not necessary to improve the competitiveness: RBI

RBI is committed to freeing entry in banking

The Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan at the Annual Day Lecture of the Competition Commission of India commented that the privatization of state-run banks isn't necessary, but how the government-backed lenders are managed needs to change to allow them the flexibility to remain competitive.

Key highlights of his speech are as follows:

* Deposits will not continue to be cheap, while the government cannot continue to pre-empt financing at the scale it has in the past if we are to have a modern entrepreneurial economy.

* Fiscal discipline will be central to sustainable growth going forward.

* Many of the projects being financed today, however, require sophisticated project evaluation skills and careful design of the capital structure.

* In the past, PSBs had the best talent. But today, past hiring freezes have decimated their middle-management ranks, and private banks have also poached talented personnel from PSBs.

* The Reserve Bank of India is committed to freeing entry in banking.

* Will announce a more regular process of giving licenses

* Proposed Post Bank could start as a payment bank, making use of post office outlets to raise deposits and make payments.

* The priority sector obligation will probably be necessary for some more time in a developing country like ours

* Examining possibilities such as if one bank, efficient at rural lending, over-achieves priority sector obligations and then sell its excess to underachiever bank.

* RBI will come out with new relaxations on business correspondents shortly.

* We can increase competition in the banking sector, strengthening banks by reducing the burden of obligations on them.

* Freeing Public Sector Banks to Compete

* Privatization is not necessary to improve the competitiveness of the public sector. But a change in governance, management, and operational and compensation flexibility are almost surely needed

* Hopes banking sector will see a much more varied set of banking institutions

Powered by Capital Market - Live News