"It's a no-brainer as it makes a lot of sense. But practically, we have miles to go. I don't think it's in the hands of RBI and the government needs to step in. How will you tackle the trade unions? State Bank of India
is struggling to merge its associates. Consolidation has its own advantage, but I don't think it will happen any time soon," a senior director with a global consultancy firm said, requesting anonymity. Industry analysts also felt there was a need for differentiated licensing regime for domestic and foreign banks.
"Many players will prefer to have a differentiated licence instead of universal banking licence. That will allow them to avoid priority sector lending targets and CRR (cash reserve ratio), SLR (statutory liquidity ratio) requirements. The only question is whether India, where over 40 per cent population is still un-banked, is ready for a differentiated licensing regime," said an analyst.
Added Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance: "The paper is supposed to highlight various aspects on banking activities and it seems that RBI would avoid any 'one-hat-fits-all' strategy. Thus, interested players will now eagerly await the discussion paper,"
According to experts, the discussion paper is aimed to bring uniformity in the structure of banks. "Many large banks in the country have multiple businesses. They have insurance, mutual fund, asset management and broking businesses other than banking. But each one of them has a different structure. These different structures create a challenge for the regulators," said Akeel Master, partner-financial services at KPMG India. "The primary objective of the paper is probably to debate this matter and offer more clarity on the corporate structure of financial service businesses (of banks)."