MUMBAI: Finance Minister Pranab Mukherjee has proposed multi-pronged development strategies for the banking sector by providing more capital for public sector banks, planning a robust increase in the banking penetration, proposing a electronic registry specifically for immovable assets, announcing the issuance of guidelines for new banking licences this fiscal etc, though some economists argued that some of the aspects might not have been enough.
The FM has armed the PSU banks with a proposed capital infusion of `6,000 crore to be provided during 2011-12 to enable them to maintain a minimum of Tier-I CRAR of 8 per cent. According to senior economist Dr. B S Misra, this is a welcome step as it will help the banks strengthen their capital adequacy levels and fund expansion of operations.
The FM also made an ambitious announcement that in 2011-12, banking facilities will be extended to 73,000 habitations having a population of over 2,000 using appropriate technologies, a target announced by him in the last Budget. He also accepted that only 20,000 villages would be covered by the banks by the end of March this year.
According to Saujanya P, senior research manager for banking at Credit Analysis & Research Ltd, this is an ambitious project of the government since it will provide a huge number of consumers access to bank credit. “This argues very well for the entire banking sector since it can significantly help in credit growth over the next few years,” she said.
The FM also announced that the guidelines for the much debated banking licences for the private sector companies will be announced by the end of this fiscal.
“Don’t forget, the proposed new banking licences in the private sector will not only enhance competition but will also enhance efficiency,” said Alok K Misra, CMD of Bank of India. He further adding that this will promote the much needed financial inclusion.
Among the other proposals for the sector, the FM has proposed a Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property, to become operational by March 31, 2011. This will help contain banking frauds where multiple loans are taken on same propery.
As an incentive to banks to provide more resources to the affordable housing segment, the FM has proposed enhanced limits for housing loans up to `25 lakh each dwelling unit, to qualify as priority sector lending.
An amount of `500 crore will be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012, and SIDBI will be provided with a capital base of `100 crore for the microfinance sector and another `500 crore for supporting the self-help groups.
Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.
At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.