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Continuous licensing may boost competition in banking sector

Continuous licensing may boost competition in banking sector
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In order to ensure competitiveness in the banking sector, there is a need to adopt a ‘continuous authorisation’ policy, Reserve Bank of India (RBI) said in a research paper.

The paper calls for reviewing the current ‘Stop and Go’ licensing policy and adopt a ‘continuous authorisation’ policy as continuous authorisation keeps the competitive pressure on the existing banks.

Continuous authorisation may remove strain on the banking system as the ‘block’ licensing may do, the paper titled “Banking Structure in India – The Way Forward.” said.

The entry process should not be restricted to one if the country has to achieve financial inclusion and broaden the geographical reach of banking.

Supporters of private banks advocate more private ownership in public banks since private lenders score better on profitability and efficiency parameters, the paper pointed out.

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