Nirmala Sitharaman said during the Question Hour in Rajya Sabha, “RBI being a regulator has established norms and those norms will be applicable to new banks.”
Finance Minister Nirmala Sitharaman said in Parliament on Tuesday that new private banks will be allowed under RBI guidelines to conduct business related to the government.
Ms Sitharaman said during the Question Hour in the Rajya Sabha that the government has now “only indicated” that the RBI may allow other private banks to do business related to the government to ensure that there is a level playing field.
“Now, based on the existing norms on which many banks have been allowed to do business. Therefore, as per RBI guidelines apply to new banks and new private banks that approach RBI. “
He said that RBI has set norms as a regulator and new banks will apply those norms.
The minister was answering a question about whether the government would adopt any criteria to allow new banks to do business related to the government.
In response to another question by Shiv Sena leader Anil Desai that if public sector banks would weaken private banks by allowing them to do business related to the government, Ms Sitharaman said that some private banks and all public sector banks are doing so Huh.
“Some customers are already benefiting from such services to private banks. Now the effort is to bring a level playing field. Some private banks are already doing it, all the public sector banks are doing it, why not all the private sector banks should be expanded so that everyone gets equal opportunities.
This is being done as business is growing and many more citizens are contacting banks. As it was reported, ease of doing business would have to reach all customers, she said.
Minister of State for Finance Anurag Singh Thakur said that banks handle two types of businesses. There is an agency commission under which revenue receipts and payments are made on behalf of the central and state governments and pension payments in relation to the central and state governments or any other item advised by the RBI.
On the other hand, some items come under use, which do not have agency commission, but have to be done by the bank such as presenting bank guarantee and banking business, etc.
Noting that the share of private banks in the banking sector has increased, Mr. Thakur said that deposits of private banks have increased from 12.63% in 2000 to 30.35% now. Advances have also increased from 12.56% to 36%.
In addition, the share of the private sector in the priority sector is increasing. Private banks have given loans of 2 12.72 lakh crores, which is 50% of priority sector loans.
During the period of COVID-19, private bank participation in the government’s emergency credit line guarantee scheme has increased.
Under this scheme, the cumulative approval from public sector banks was 26 95,261 crore, which was 38.22% of the total loans. On the other hand, the private sector bank loan was Rs 29 1,28,297 crore, which was 51.5% of the loan of the Emergency Loan Guarantee Scheme. This clearly shows that lending has increased and their participation is higher, he said.
Therefore, the decision to allow private banks to do business related to the government was taken for the betterment of consumers, ease of business and ease of living, he said that this would enhance customer experience, enable innovation and latest technology that would help Business Communities and MSMEs.
The minister said, “This will also increase competition for higher efficiency.”
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