Govt, RBI working to lower banking costs, expand reach: FM

Mumbai, Mar 27 (PTI) Expressing concern over high costs
and limited reach of banking services, Indian Finance Minister
Pranab Mukherjee on Sunday said that the government was
working in collaboration with Reserve Bank of India (RBI) to
address these concerns.
"The cost of banking intermediaries in India is high and
bank penetration is limited to only a few customer segments
and geographies," Mukherjee said here Sunday.
"We are trying to address this in collaboration with the
Reserve Bank of India, and with the active participation of
the banking and non-banking financial entities," he added.
Mukherjee also said that there was a need to "reflect upon
possible flaws in our system and address them to withstand
adversities. We need to make our financial sector more
competitive by enhancing efficiency and transparency."
"While greater competition is welcome, we have to guard
against the competitive race to the bottom," he said, while
expressing hope that this perspective would guide the growth
of Indian banking system in the coming years.
Mukherjee was speaking at Sir Sorabji Pochkhanawala
Memorial Lecture 2011 as part of the centenary celebrations of
Central Bank of India. The PSU bank was set up by Sir Sorabji
Pochkhanawala.
The Finance Minister said that PSU banks were playing a
very important role in India's economic growth and they
constitute over 72 per cent of the banking sector assets in
the country.
"While they are expected to improve their outreach and
scalability for sustaining high growth of the economy, they
are second to none in retail banking practices and
profitability.
"There are, however, several concerns that need to be
fully addressed," Mukherjee said, in reference to the issues
like high costs and need to expand the banks' reach to more
customer segments and geographies.
The minister said that most of the financial sector
policies in the past few decades were aimed at accelerating
the penetration of the banking and financial services.
"However, as I said, the outcomes of these efforts are yet
to show the desired results. Newer perspectives and approaches
towards financial inclusion are the need of the hour.
"There is a case for the policy makers and other stake
holders to re-strategize the financial policies that are meant
to reach the un-reached and the unbanked sections of our
country," he added.
To address the issue of capital constraints faced by the
PSU banks, Mukherjee said the government had provided over Rs
20,000 crore towards recapitalisation of public sector banks
during 2010-11.
"An additional amount of Rs 6,000 crore is also being
provided for 2011-12. This will enable the PSBs to meet the
credit requirements of the growing economy," he added.