Banks Watch New RBI Governor For Liberalisation

News: Banks will be watching the newly-installed governor of the Reserve Bank of India (RBI) to determine his commitment to reforms and support for stronger competition, according to the Times of India. The paper carried an editorial arguing that the RBI and its new head, Raghuram Rajan , will likely face resistance from various ' interest groups ' for allowing foreign lenders more operating freedom in the country. However, the paper goes on to argue that support from customers - which it argues are paying for the lack of competition in India ' s banking industry through carried costs - will likely overturn this inertia.

BMI View: Newly-installed Reserve Bank of India (RBI) Governor Raghuram Rajan has announced plans to ease restrictions on commercial bank licensing and branch expansion, and has promised to unveil further reforms before long. While such steps are encouraging, the elephant in the room remains the overarching dominance of the banking behemoth State Bank of India (SBI). We believe that a leveling of SBI's playing field vis-à-vis its private sector peers is a necessary step to improve efficiency and reduce systemic risk in India's banking sector.

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Geography: India

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