RBI’s 4-stage strategy to bring banks back to life; suggests top-to-bottom approach

By: |
March 13, 2020 12:33 PM

In the first segment, RBI has planned to take care of large Indian banks with a domestic and international presence.

indian banks, banking system, fintech, bigtech, new technology in bankingTo give banks a cutting edge over new emerging companies, RBI has introduced a 4-step long-term plan in its March 2020 bulletin.

The Indian banking industry is facing tough competition from fintech companies and large technology companies which are entering into the financial services industry in a big way. To give banks a cutting edge over these new emerging companies, RBI has introduced a 4-step long-term plan in its March 2020 bulletin. The Reserve Bank has considered a top-to-bottom approach to strengthening the banking industry. Recently, various banks of India had to go through a rough phase. 

  • Large Banks

In the first segment, the Reserve Bank has planned to take care of large Indian banks with a domestic and international presence. This process may also involve the further merger of PSU banks.

  • Mid-sized banking institutions

The second step is targeted towards several mid-sized banking institutions including niche banks with economy-wide presence.

  • Small banks

After this, the RBI is set to go for smaller private sector banks, small finance banks, regional rural banks, and co-operative banks, that give loans to small borrowers in the unorganised sector in rural and local areas.

  • Digital players

RBI said that its fourth segment in this plan may consist of digital players who may act as service providers directly to customers or through banks by acting as their agents or associates.

Also Read: SBI to invest Rs 7,250 crore in Yes Bank, others to bring Rs 5,000 crore

Some BigTechs are venturing into payments, money management, insurance, and lending activities. Given their size and reach, their entry into financial services has the potential to bring about the rapid transformation of the financial sector landscape. It may, of course, bring many potential benefits, such as the assessment of the riskiness of borrowers, reducing the need for collateral, etc. 

“These developments pose a challenge to banks as well as banking regulators. Banks have to imbibe these new technology and business practices to remain competitive,” RBI said. 

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