Indian banking sector has less systemic risk

Industry players feel that the systemic risk in the Indian banking sector is muted because of the existence of many medium and small size banks.

It may be noted that systemic risk arises when there are large-sized or too big to fail banks.

However, in India, many banks are medium and small-sized and hence there is less risk of inter-connectedness, industry players like Rana Kapoor, Founder & CEO of Yes Bank feel.

On the possibility of new entrants in the banking sector, industry players feel that new players must create differentiation, to be somewhat creative.

With the Reserve Bank of India (RBI) releasing the much awaited norms for new banking licenses, corporates are expected to set up a bank through a wholly-owned non-operative financial holding company (NOFHC).

Industry players feel that a large part of the population is under served by the banking sector and more than 50 percent is financially excluded. Hence, new banks must create differentiation, to be somewhat creative.