Reserve Bank of India (RBI) Governor Duvvuri Subbarao said that reform initiatives in the wake of the crisis are aimed at making banking more challenging and thereby spur innovations of a more value adding and sustainable variety.
“Perish the thought of Indian banking ever getting boring. Boring banking sector is neither a cure against crisis nor appropriate for future of banking,” Subbarao said. He counted four challenges – deepening financial inclusion, financial infrastructure, strengthening risk management and improving efficiency – for Indian banking sector to meet head on in the post crisis world.
RBI noted that while financial activity is increasingly getting international, regulation remained fiercely national. “Going forward, our banking sector too will acquire an increasingly international character – Indian banks will increase their presence abroad while foreign banks will have larger presence in India,” he said.
Subbarao noted asset-liability mismatch issue faced by banks especially at a time when government’s estimated funding requirement on infrastructure in next five years is over Rs 20 lakh crore. While infrastructure requires long-term funding, deposits of bank, main source of funds, are relatively short-term.