Even banks, which lend money to such projects, do it from their short-term deposits, thus creating an asset liability mismatch. Against this backdrop, the Reserve Bank of India’s proposal for a wholesale and long-term finance bank to cater to such needs is welcome.
Even more heartening is the strong entry barrier the regulator has proposed. The minimum capital requirement of Rs 1,000 crore will remove non-serious players from the list. It is also a good move that banks would not be asked to maintain the statutory liquidity rate and may only accept term deposits of at least Rs 10 crore, with strict restriction on premature withdrawal. These measures will help them in lending and make it a viable proposition.
Though it is still early days, if the proposal pans out well in reality, it has the potential to spur economic growth.
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