FE@CAMPUS MASTERMIND: Response by Kishan Shahi to question for Jan 28-Feb 3

Jan 10 2014, 15:41 IST
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SummaryFE@CAMPUS MASTERMIND: QUESTION FOR JAN 28-Feb 3: The Banking Laws (Amendment) Bill, 2012, was recently passed by Parliament. Does India need new banks?

The many benefits expected from the Bill, increased competition in the banking industry and enhanced flow of foreign funds. In addition, the Bill has enhanced the regulatory powers of Reserve Bank of India (RBI) and acceded to RBIs demand for more enabling legislation. The Bill has increased the cap on voting rights for investors from 10 to 26 per cent in private sector banks, and from 1 to 10 per cent for public sector banks & also desired by the foreign investors as increase in minority shareholding is expected to improve the corporate governance standards.

This may increase flow of foreign money in Indian banks which is essential to drive not only incremental credit growth but also help banks meet enhanced capital requirements under Basel III. And if we compare total bank assets in India is also very less in comparative to Germany (1st position) Deutsche Bank @ US$b2809.89 , China (13th position) Industrial & Commercial Bank of China @ US$b2763.59 & India State Bank of India is leading in term of Bank assets @ US$b927.46(approx.). So this bill also help in enhancing the assets of Indian banks.

It is anticipated that new banking licenses will be awarded to those who have significant presence in semi-urban and rural areas as Government seeks to deepen financial inclusion. It also leads to enhancing competition, attracting foreign investors and creating global Indian banks, it may prove to be game changer for the industry.

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