New banks should not be clones, but different: Chidambaram

The proposed new private banks, awaiting license from the Reserve Bank of India (RBI) to commence business, should not become clones of existing banks but serve their customers differently, Union Finance Minister P. Chidambaram said Saturday.

"We don't want the new banks to look like each other with different mastheads. We want each of them to cater to needs of special group of customers who do not have an account in a bank. Each bank must strike out different path to compete against each other," Chidambaram said on the margins of a bank function here.

The central bank (RBI) Sept 20 set up an advisory committee headed by its former governor Bimal Jalan to scrutinise applications of 26 firms, which applied for licenses to set up private banks.

The RBI plans to grant license to set up seven new banks after receiving the committee's report in January 2014.

The central bank board Friday named its former deputy governor Usha Thorat, former Securities and Exchange Board of India chairman Chandu Bhave and former ICICI Foundation chairman Nachiket Mor as members of the committee.

"It is only if the new banks attempt different things and do things differently, they will have competition, efficiency and progress," Chidamabaram said after remotely unveiling 101 new branches of State Bank of Mysore (SBM) here across states.

On infusing additional capital into state-run banks, the finance minister said the government was waiting for banks to come up with their specific plans to assess if they need more capitalisation.

"We will work out how much (capital) each bank requires depending upon how much additional credit they will be able to provide to specific sectors at lower rates," he observed.

State-run banks will be encouraged to lend more in certain sectors at lower rate to boost demand.

"Let each bank come up with what it can do. Once we know what they (banks) can do, we can aggregate the demand and calculate how much additional capital they require and they will be provided," Chidambaram said.

Presenting the Union budget for this fiscal (2013-14), the finance minister proposed to infuse an additional capital of Rs.14,000 crore in the state-run banks for strengthening their equity base.