After six years, last week, the RBI gave out a new banking license to the acquirers of a distressed cooperative bank. Banking remains one of the few sectors of the Indian economy where license raj is well and truly alive. The claim, a well-justified one, is that licensing controls the risk of systemic failure, but it has resulted in an environment where several sectors are credit-starved; the credit to GDP ratio at 50% is among the lowest and across-the-board cost of capital is among the highest among the world’s major economies. In an increasingly growth-challenged economic scenario brought into sharp focus by Covid-19, reforms in bank licensing assume critical significance.

Today in Policy Talk, K Yatish Rajawat, CEO CIPP, speaks to Nachiket Mor, who has been a banker, non-profit head, and now a researcher. Mr Mor’s various simultaneous interests include banking, technology and non-profits. In this discussion, he weighs in as the banker who headed the committee that recommended licenses for differentiated banking and small finance banks.