RBI asks Govt to speed up reforms in banking system

Need to increase efficiency through greater entry and competition

Reserve Bank of India Governor Raghuram Rajan.

“Participation is best enhanced not through subventions and subsidies but by creating supporting frameworks that improve transparency, contract enforcement, and protections for market participants against abusive practices,” he added. According to RBI Governor, technology can be very helpful in reducing the costs of supportive frameworks, and can bring hitherto excluded populations into the financial fold. “It is these ideas that guide our medium-term reform strategy.”

“Financial sector reforms need to move on many fronts,”  “for a country as big and populous as India, reforms cannot be shots in the dark, subjecting the economy to great uncertainty and risk.” “Wherever possible, we have to move steadily but firmly, ever expanding the scope of reforms while always limiting the uncertainty they create. The Chinese term this ‘Crossing the river by feeling the stones’. It is an appropriate metaphor to guide our own reforms,”

The most appropriate institutions will prevail when the competitive arena is level, so we have to remove regulatory privileges as well as impediments wherever possible, especially those that are biased towards some form of ownership or some particular institutional form.

“Participation is best enhanced not through subventions and subsidies but by creating supporting frameworks that improve transparency, contract enforcement, and protections for market participants against abusive practices,” he added. According to RBI Governor, technology can be very helpful in reducing the costs of supportive frameworks, and can bring hitherto excluded populations into the financial fold. “It is these ideas that guide our medium-term reform strategy.”

Source: The Hindu

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