Creating a competitive banking industry

India has 157 banks—26 public sector banks, 43 foreign banks, 64 regional rural banks, 13 old private sector banks, seven new private sector banks and four local area banks. It is thus quite understandable that the Reserve Bank of India (RBI) has been criticized for being unnecessarily parsimonious when it gave just two licences last week to set up new banks. These two new banks will be a drop in the ocean.

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