Column : Interesting banking times ahead

Feb 23 2013, 02:12 IST
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SummaryRBI bars new banks from lending to promoter group companies which takes care of regulatory concerns.

be closed down subsequently? It is hard to conjecture right now.

Nonetheless, we will see some interesting times ahead. NBFCs will be eager to get out of the ‘NBFC trap’ and move over to banking given the limitations that are there for their own current line of activity. The corporate houses will find this interesting, though blunted by the norm on connected lending. The private banks will feel the heat of competition increasing in the high-banking centres as new players always provide some incentives to customers, which have to be matched. The government has to take a call on capitalising the public sector banks, and we can hope to see considerable divestment, which will be the way to go given the pressure on the fiscal balances to recapitalise these banks. Foreign banks may not be expected to join the fray in any way and would probably tend to follow a wait-and-watch policy before taking a step forward.

Quite clearly, there will be quite a bit of action on this front. As the economy will take time to pick up and grow, the first couple of years would witness more competition, which, in a way, is the right way to go.

The author is chief economist, CARE Ratings. Views are personal

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