The Indian banking sector is all set to see a sea change in next two years with several new institutions and existing government banks undergoing a great change, RBI governor Raghuram Rajan said.
"In next two years the banking sector will see a number of changes. We will have new institutions like payment banks, small finance banks and a postal bank possibly," said Rajan at the 11th convocation of the National Institute of Bank Management in Pune.
He also said the government-owned banks would also undergo a great change. The Reserve Bank of India (RBI) has announced the list of applicants for small finance banks and payment banks.
The central bank has received applications for setting up small finance bank and for payment banks.
Rajan said the derivatives market will become vibrant and several new opportunities would arise.
According to Arvind Subramaniam, chief economic advisor, Indian economic growth is higher than that of China. Subramaniam said availability of skilled manpower is difficult in India but the country is trying to grow despite this deficiency. He said India is one of the few growing economies having a democratic governance.
Banks in distress will get capital
Rajan said that banks in distress would get capital support from the government if they make a clear case for recapitalisation. The government has changed the criteria for infusion of capital in the public sector banks which says banks fitting the `Return on Asset and Return on Equity' parameter would be eligible for recapitalisation.
“Capital, this is something that government has focused on which is that can we send a message that we will recapitalise good banks. Now, that does not mean the banks that are in distress will not get capital but they will have to justify in a clearer way what they are going to use that capital for,” he said.
