RBI panel to bridge banks, FIs

MUMBAI, DEC 8: The Reserve Bank of India (RBI) on Monday constituted a six-member working group headed by S H Khan, chairman, Industrial De...

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MUMBAI, DEC 8: The Reserve Bank of India (RBI) on Monday constituted a six-member working group headed by S H Khan, chairman, Industrial Development Bank of India (IDBI) to "harmonise the role and operations" of banks and financial institutions.

According to the RBI, the working group will review the role, structure and operations of DFIs (development financial institutions) and commerical banks in emerging operating environment and to suggest changes. The panel is asked to suggest measures in synchronising the term lending and working capital finance operations of banks and DFIs, examine whether DFIs could be given increased access to short term funds and the regulatory framework needed for the purpose and to suggest measures for strengthening of organisation, human resources, risk managment practices and other related issues in DFIs and banks in the wake of the capital acccount convertibility.

Other members on the working group include State Bank of India chairman MS Verma, Industrial Credit & Investment Corporations of India managing director K V Kamath, Industrial Finance Corporation of India chairman K D Agrawal, Bank of India chairman M G Bhide and Union Bank of India chairman A T Pannir Selvam.

The central bank has made it clear that the difference between banks and financial institutions will disappear in the long run. "There have been structural changes because of deregulation in the financial sector. We will look into the issues like regulatory aspects including the reserve requirements and the changing role of financial institutions and banks in the context of the proposed capital account convertibility," Khan said about the role assigned to the panel which is asked to submit its report in three months. The RBI has already started removing the barriers between banks and FIs. FIs which traditionally operated in the long term project finance and debt market started entering the short term market.