Kochi: The banking sector is in for tough competition mainly from the new entities that will enter the field soon, Reserve Bank of India Governor Raghuram G Rajan said here on Saturday. The competition will also bring in new opportunities for growth for the existing players, Dr Rajan said delivering the 14th K P Hormis Commemorative Lecture on ‘Financial sector reforms, the past and the future’, organised by the Federal Bank Hormis Memorial Foundation Trust in memory of the bank’s founder.
One of the new tools will be payment banks which cannot accept deposits but solve the last mile connectivity in banking in remote areas. Small banks are another segment.
“The RBI has already licensed three small banks and there will be more soon,” Dr Rajan said. The small banks will have a cap of Rs 25 lakh for their lending, and hence will be able to service the small and medium segments in a better way.
He also forecast the emergence of unified payment interfaces which will allow anyone to pay anyone else in a simplified way, trade receivable exchanges which would help the small scale sector companies realise their receivables faster and the alliance between internet market place and financial institutions as the new entrants into the financial world.
The merging new system will force the existing players to come out with new products and there will be healthy competition, the RBI governor said.
This will entail the banking system to rework its human resource too. Since technology will be one of the key tools to drive competition, the banks will have to increasingly look for new talents with a variety of skills as IT and human resources, he said.
Federal Bank chairman Nilesh Shivji Vikramji and managing director Venu Srinivasan also attended the function.
