Speaking at the 90th-anniversary celebration of the Reserve Bank of India (RBI), Prime Minister Narendra Modi urged the central bank to evaluate a revamped banking structure to address future funding requirements. Emphasizing the importance of assessing credit needs, Modi highlighted the necessity for aligning banking strategies with the nation's growth prospects.
Assessment of Credit Needs:
During his address, Prime Minister Modi stressed the significance of the RBI's role in evaluating credit requirements in tandem with the country's evolving economic landscape. He underscored the need for exploring innovative financing, operational, and business models to accommodate the changing dynamics. Acknowledging the challenges posed by technological advancements such as artificial intelligence and blockchain, Modi emphasized the importance of cybersecurity amidst the surge in digital banking and fintech innovations. He called for proactive measures to adapt the banking sector to emerging trends.
Industry Stalwarts in Attendance
The RBI event saw the presence of prominent figures from India's business sphere, including Reliance Group Chairman Mukesh Ambani, Tata Sons Chairman N Chandrashekaran, and Mahindra Group Chairman Anand Mahindra, alongside top bankers. While Prime Minister Modi refrained from directly addressing the contentious issue of corporate ownership of banks, he urged business houses to contribute capital to meet the economy's funding needs. The issue of conflict of interest raised by former RBI Governor Raghuram Rajan and deputy governor Viral Acharya regarding corporate-owned lenders remained implicit in Modi's remarks.
Ongoing Policy Debates:
The debate over allowing large corporate houses to promote banks resurfaced, referencing an RBI working group's 2020 suggestion. However, the central bank has yet to make a decision on the matter. Currently, major business entities have ventured into the financial sector through non-banking finance companies. Prime Minister Modi also highlighted concerns regarding the private sector debt-to-GDP ratio, urging the RBI to conduct a comprehensive study in the Indian context. He emphasized India's pivotal role in global economic growth, contributing approximately 15% to the incremental global GDP.
Prime Minister Modi's call for a reevaluation of the banking structure reflects the government's commitment to ensuring the financial sector's alignment with India's growth trajectory and emerging challenges. As the RBI navigates the evolving landscape, the outcomes of this assessment are anticipated to shape the future of banking in India.
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