Das stated that the central government and the RBI are constantly discussing the privatization of public sector banks (PSBs).
Shaktikanta Das, governor of the Reserve Bank of India (RBI), stated on Thursday that he sees four types of banks operating in India in the coming decade. Governor Das stated that the central bank is in talks with the government about privatizing two banks. He delivered the keynote address at the Times Network India Economic Conclave 2021.
The first group of banks would be dominated by a few major Indian banks with both domestic and foreign operations. Smaller private sector banks, small finance banks (SFBs), regional rural banks, and co-operative banks would make up the third group, which would specifically cater to the credit needs of small borrowers. The fourth segment would include digital players who act as service providers directly to customers or as agents or associates for banks.
Das predicted that “digital players would increasingly emerge as critical pieces across all segments.” The governor’s statement could be interpreted as a nod to neo-banks, which have yet to make an impact on the Indian financial system but are becoming more prevalent. He stated that each of these segments must comprehend society’s future needs and respond to the growth in the Indian financial sector, and that information technology (IT) systems must be developed to handle the exponential increase in the number of transactions. Das cited the Unified Payments Interface (UPI), which took three years (2017-2019) to register a monthly count of one billion transactions, but then doubled that to two billion in a year. “This demonstrates the need for system and platform scalability in such a way that it can be easily scaled up, not incremental scalability, but exponential scalability,” the governor said.
Das stated that the central government and the RBI are constantly discussing the privatization of public sector banks (PSBs). “We definitely had discussions prior to the Budget, and we had even more after the Budget. So, naturally, the central government takes the regulator’s perspective into account in the future process, and we are discussing this issue,” he added. Despite a new surge in Covid infections, the governor said the 10.5 percent growth forecast for the coming fiscal year may not need to be revised. He attributed this expectation to the vaccination program, increased public awareness of Covid protocols, and a lower likelihood of lockdowns.
“I believe that the recent revival of economic activity should continue unabated in the future. Although I should not say it until our research team has presented me with the details, my understanding and preliminary analysis show that the 10.5 percent growth rate we forecasted for next year does not require a downward revision,” Das said.