Need to make banks more vibrant, says Rajan

"We need to do a lot of things to make our banking sector more vibrant," Rajan said during an interactive session with Singapore's Deputy Prime Minister Tharman Shanmugaratnam at a CII event here.

He said the entry of a whole set of new banks of different kinds is going to contribute towards improvement of the sector.

Last year, RBI had given in-principle approval to 11 payment banks and 10 small finance banks. Some of these entities are looking at starting their operations later this year or early next year.

In the first bimonthly policy of the fiscal announced earlier this week, RBI had said it will be looking at issuing more differentiated banking licences.

"In addition to recently licensed differentiated banks such as payments banks and small finance banks, the Reserve Bank will explore the possibilities of licensing other differentiated banks such as custodian banks and banks concentrating on whole-sale and long-term financing," it had said in the policy.

The governor also emphasised on enhancing capacities of existing banks. "Also, improving the capabilities of the existing banks is extremely important and which is why the asset clean up is part of the answer," he said.

Rajan has set March 2017 as the deadline for banks to clean up their balance sheets. On markets, he said there is a need to strengthen markets by allowing new instruments and new set of participants.

"We have a lot of new technology which allows us to do this and we have to make sure that we do it in a safe way," the governor said.