Bank structure scan in time of new licences

Subbarao: Critical issues New Delhi, June 9 (PTI): The RBI will come out with a paper on banking structure, which will discuss issues such as consolidation even as it prepares to issue new licences after a decade. The RBI will also involve enforcement agencies and tax authorities before it issues the bank licences to corporate entities for which applications can be made till July 1. "My take on that (consolidation) will be told very clearly when the RBI comes out with the paper. It's a paper about the banking structure for India. We are going to bring it out in the next one month where we will address these issues or at least define the issues for discussion," RBI governor D. Subbarao said. He was replying to a question about finance minister P. Chidambaram talking about the consolidation of banks at a time new licences were on the anvil. Subbarao said the Narasimham committee on the banking sector, which looked into this issue, had said that India must have some large banks at the global level, competitive and comparable with global banks. The panel also said the country must have some mid-sized banks and some small-sized banks, which can have a larger reach. "We have discussed this issue and as we licence more banks we believe it will add to the competitiveness of a number of banks," he said. The discussion paper, sources said, would also cover issues such as the need for investment banks, policy on the presence of foreign banks, conversion of urban co-operative banks into commercial banks and periodicity of licensing new banks, whether in blocks or on tap. On whether the RBI has any number in mind for issuing new licences, the RBI governor said, "There is no number in mind. I cannot commit on the number at this time. But to believe that if you have 86 banks in the country today, we would give another 86 licences is, too, far fetched." "After all this process, if we end up giving 2 or 3 licences, it will be a vacuous process. So, we got to strike the right balance...both unwilling and unable to comment on a number now," Subbarao said. The RBI governor dismissed the possibility of extending the last date for receiving applications. "I don't think any serious potential applicant is sitting idle now. And you know people will wait till the last date to apply. I think they will keep their application ready. We are expecting that most people will apply in the last week because there is nothing to be gained by applying early and we are not giving any additional mark for the date of application," he said. Ponzi menace The RBI is of the view that setting up a new regulator may not solve the problem of the huge amounts of public money being collected via various Ponzi schemes, and such illegal activities can only be checked by stronger surveillance and better enforcement of laws. Also, active involvement of state governments is very important to keep a tab on such activities and take action against the culprits, said Subbarao.