The Election Commission's green signal to the Reserve Bank of India (RBI) for its in-principle grant of banking licences to non-banking entities is a welcome move. It remains to be seen whether these non-banking entities will establish their banking operations in rural areas as well. The RBI must bring such entities under its ambit just like any other commercial, public sector, private sector and foreign banks. It must impose the cash reserve ratio and statutory liquidity ratio norms for such entities, so that they don't go bankrupt. They must be subject to the priority sector lending clause as well, so that the needy low-income groups get capital easily. The central bank must initially do a monthly or at the most, quarterly check of these entities and, most importantly, keep a check on non-performing assets (NPAs). NPAs have caused problems but private sector banks have done well to maintain NPAs compared to their public sector counterparts.
Umamaheshwaran N Chennai
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