On-tap issue of bank licences soon; need more competition, says Raghuram Rajan

[related-post]

Rajan said the board members should ideally come from varied sectors and have varied skills. Compensation for board members should also be taken care of, so as to attract better talent. The board should be empowered more to adopt better strategies, and decisions like appointment and compensation of top executives, he said.

The governor said the global stock market turmoil has spilled over to the balance-sheets of banks, but he is confident that it will pass soon. “Not all banks have problems, as there are some healthy banks also in the system. The problems are not of a permanent nature and we will soon resolve them,” he said.

“What we need is more competition in the banking sector to give the financial sector more depth and size,” he said. The new payment banks and small financing banks can reach out to the small and medium enterprises and competition will help increase access, he added.

Concerned about “high inflation”, he said it’s a must to bring inflation down to keep the country’s exchange rate competitive. “Until we bring inflation down there will be a certain amount of depreciation (of the rupee), which is necessary to ensure that we don’t become uncompetitive,” Rajan said.

With PTI inputs