On the occasion of the 90th anniversary of the establishment of the Reserve Bank of India, PM Modi calls for a “newer banking structure” in the future

Mumbai:

Prime Minister Narendra Modi on Monday said there is a need to look into “new banking structures” as the financial sector landscape continues to change.

Addressing the 90th anniversary inauguration ceremony of the Reserve Bank of India (RBI) here, Prime Minister Narendra Modi said the changing situation may require newer approaches to “financing, operations and business models”.

The Prime Minister said the banking sector needs to move forward to ensure that it can fund the credit needs of projects needed for the country’s future growth.

He said the industry also faces challenges including artificial intelligence and blockchain, which are changing the face of banking, and cybersecurity with increasing reliance on innovations such as digital banking and fintech.

“In this context, we need to think about the changes required in the country’s banking sector and its structure,” Prime Minister Modi said while addressing the audience, which included India’s richest man Mukesh Ambani, Tata Sons Chairman Chandrasekaran, Mahindra Group Chairman Anand Mahindra and some top bankers.

Prime Minister Modi also said the Reserve Bank of India should assess credit needs, taking into account the country’s growth prospects and potential.

The Prime Minister did not mention bank ownership specifically, but it can be noted that corporate ownership of banks has been a very contentious issue in the past.

Those who support allowing businesses to own banks say business institutions can inject needed capital into lending institutions to ensure the economy’s financing needs are met.

Opponents of the idea include former RBI governor Raghuram Rajan and deputy governor Viral Acharya, who point out that corporates or large industrial houses have loans This human structure carries the risk of conflicts of interest.

In 2020, an RBI task force had recommended changing the rules to allow large corporate houses to promote banks, but a year later media reports said the RBI had sidestepped the rules.

In 2013, many commercial banks unsuccessfully applied for universal banking licenses. Currently, large corporate banks have included non-banking financial companies (NBFCs) as part of their financial industry operations.

Meanwhile, Prime Minister Modi suggested the Reserve Bank of India conduct a study on the same in the Indian context, amid concerns over high private sector debt-to-GDP ratios in many countries around the world.

He said that India contributes 15% to incremental global growth and is committed to promoting economic self-sufficiency in the economy so that it can withstand any challenges.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)