After the Finance Minister P. Chidambaram spoke about adopting innovative methods to follow differential licensing in India, the SBI chief was quick to say that we should ensure there is no regulatory arbitrage.
According to Arundhati Bhattacharya, “Otherwise, the more lucrative part of the business will get a lot of flair and for universal bankers like us, some amount of business is cross-subsidised by other players, but if we get a lot of competition in the lucrative business, then it would be difficult to maintain the other business.”
“Other than that if somebody wants to do a business in a particular area after having met all the regulatory requirements, it is fine… their call,” Bhattacharya added.
Bank aspirants with differentiated models of banking will be preferred while issuing new banking licences, said Finance Minister P. Chidambaram at the annual banking conference BANCON.
“I appreciate the need for different models of banking. I am happy that some of the applicants for licences have different models. We need different kinds of banks to cater to different segments of Indian society,” said Chidambaram.
The regulatory requirements include maintaining adequate SLR securities, priority sector lending and CRR, among others.
ICICI Bank chief Chanda Kochhar, in a bankers’ meet post-monetary policy in October, had also said differential licensing could lead to regulatory arbitrage.