Over two weeks after State Bank of India chairman Pratip Chaudhuri criticised Reserve Bank of India for its liquidity tightening measures,RBI Governor D Subbarao on Tuesday came out against one or two banks monopolising the banking system and argued for the formation of at least four-five banks with comparable size to avoid monopolistic market power.
Subbarao said,The second largest bank in the system is almost one-third the size of the biggest bank (State Bank of India). This creates a monopolistic situation. The task is to ensure that there are at least 4-5 banks of comparable size at all times to ensure that consolidated banks do not acquire monopolistic market power,adopt predatory behaviour and force smaller banks into unviable models.
The SBI chief had on July 25 said an interest rate hike would have been less damaging than the RBIs measures to choke liquidity in its attempt to salvage the rupee.
The financial crisis exposed the risk posed by the Global Systemically Important Financial Institutions (G-SIFIs) as these were too big to fail,the RBI Governor said while addressing the Ficci-IBA banking conference here.
Subbarao said the country should aspire to have a few Indian multinational banks in the near future by selective acquisition. What type of largeness should Indian banks attempt? Large banks like the Chinese banks or large banks with global presence? … It may take years for our banks to become global players by way of organic growth.
RBI opposes FSLRC proposal
New Delhi: Reserve Bank Governor D Subbarao has expressed his reservations against the proposal of Financial Sector Legislative Reforms Commission (FSLRC) to take away regulatory oversight on NBFCs from the RBI and placing them under a Unified Financial Authority. One of the major causes of the 2008 financial crisis was that credit intermediation activities were conducted by non-banks (the so called shadow banks) which were primarily outside the regulatory purview. This raised serious concerns of regulatory arbitrage…, Subbarao said.
Perhaps need CRR,SLR cut
New Delhi: RBI Governor D Subbarao has said perhaps there was a need to reduce cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) to be maintained by banks. I do recognise that there is a demand,and perhaps a need,for further reduction (in CRR and SLR), he said. ENS