Welcoming RBI's guidelines for grant of new bank licences, eminent banker Deepak Parekh has said consolidation is a greater need for the Indian banking space to create some large banks of global size and scale.
"I think that the RBI (Reserve Bank of India) guidelines for grant of new licences are well thought-through and it seems that a lot of thinking has gone into it," Parekh told PTI.
However, a greater need of the hour in the Indian banking space is banks of large size and scale to match their international peers and consolidate their positions on the global league tables, Parekh said in a telephonic interview.
A veteran banker and well-respected industry leader, Parekh is Chairman of financial services giant HDFC Ltd whose group companies include leading private sector lender HDFC Bank.
When asked whether he feels that Indian banking sector needs more players, Parekh, however, said a greater need of the hour is banks with much larger size and scale.
"I have always said that we need consolidation, rather than more players in the Indian banking sector. "The need today is for more consolidation than the new banks, because what we require is large-scale banks," he said.
Asked if Indian banks need to match the size and scale of their international peers and consolidate their positions on global league tables, Parekh replied in affirmative and said: "We need scale for that and we would need consolidation to get the scale."
Parekh also said the Indian banking sector needs to address the issue of huge unbanked population in rural areas. "We need to have much more rural branches today, although it will be very difficult for new banks to have 25 per cent] rural branches. It is a very tough call.
"Still the guidelines are very well thought-through for a comprehensive, pretty fair and transparent process to grant new licenses," he said.
Parekh further said RBI in its final guidelines for new banking licences has taken care of all critical issues such as capital adequacy, foreign holding and rural branches.
"They have not excluded anyone outrightly and now it is their (RBI's) prerogative that how many licences they want to give," Parekh said.
Earlier, there were apprehensions that RBI might not allow companies with exposure to certain high-risk sectors like brokerage and real estate to seek banking licenses, while there were also voices of opposition against large business] houses being allowed to set up banks.
However, the final guideline does not