FM says entities with innovative ideas should get new banking licence in 2014

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Innovative entities should get new banking licence : FM
The Finance Minister P Chidambaram on Friday said that new banking licences, which are expected to be announced in January 2014, be given to entities which have innovative ideas and different model of banking, addressed to meet the needs of special segments of the people.

A Business Standard report quoted Chidambaram as saying that "I am happy some of the applicants that have applied for private banking licences to the Reserve Bank of India (RBI) have come up with different models of banking. We need banks that cater to communities. We need banks that cater to people in tribal populations.

We need different banks to cater to the Northeast. We need banks that cater to the urban poor — their requirements are different from the requirements of the rural poor. We need banks that cater mainly to farmer families. We need banks that cater to women. I do not know how established major banks can quickly shift gears to cater to each one of these. Maybe, they cannot, and I would accept that. It is, therefore, necessary for us to promote banks that cater to these individual segments of our people."

Chidambaram was addressing the annual banking event, BANCON on Friday. "I sincerely hope of the new banking licences given in January 2014, at least some will go to those who have come up with an innovative and different model of banking, addressed to meet the needs of special segments of the people. It would be a pity if the new licences also go to banks that clone existing banks. I am confident that will not happen and innovative ideas and innovative banking will gain recognition by the licensing authority," he added.

FM also appreciated Governor Raghuram Rajan for differentiating banking licences as he emphasized the need for special kind of banks who can reach the place where existing players could not. "There is more cloning than differentiating. I am happy the governor has spoken about differentiated banking licences. While talking to people and travelling through the country, I find there is a need for different kinds of banks. Some years ago, we had encouraged local area banks, but that initiative was killed after the first three licences were issued."

Dion Global Solutions Ltd.

Story first published: Saturday, November 16, 2013, 9:30 [IST]
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