The Hindu Business Line : Small finance banks

The banking sector liberalisation and the consequent requirement of ever increasing capitalization has made the survival of small sized banks difficult not withstanding the role of these banks in meeting the aspirations of the public through their region specific customised approach.

In the context of this scenario, the recommendations of the Dr Raghuram Rajan Committee on Financial Sector Reforms for creation of small finance banks are welcome (Business Line, April 8).

These banks can be allowed to have low capital adequacy ratio and can be permitted to borrow from foreign banks to meet their financing requirements as they will be essentially catering to the rural and semi urban segment of the population.

The refinance provided by the foreign banks can be set off against their agricultural segment credit under priority sector norms.

This strategy will ensure that more credit flows to the agricultural segment.

P. E. Muthu Mumbai

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