Triad banking model working well in India, says RBI Deputy Governor

Mumbai, Mar 31 (ANI): Reserve Bank of India (RBI) Deputy Governor Rakesh Mohan has said that triad banking model - state-run, private and foreign banks - is working well in India.

Mohan said that the growth of each sector has spurred healthy competition.

"We have a system where you have public sector banks, private sector banks and foreign banks. This competition seems to have had a bit positive effect on the functioning of each of those segments. So, that in some sense, you built up a system which is having positive effects with each segment in terms of competition provided by the other segments," Mohan said on the sidelines of a seminar.

A special report on India's financial sector recommended on Monday that the entry of foreign banks into India must be gradual, and there was capacity for further consolidation in the banking sector.

The six-volume review of the financial system, prepared by a government and RBI committee formed in 2006 and headed by Mohan, said if the government could not meet the funding needs of state-run banks, then one option was to merge banks where its stake had fallen to near 51 per cent with other banks where state ownership was much higher.

State-run banks account for more than 70 per cent of India's banking sector. The State Bank of India (SBI), the country's biggest lender, has more than 10,000 branches.

There are 29 foreign banks, which have more than 270 branches.

The report came out ahead of a separate central bank review of the role of foreign banks, which is expected in coming months. (ANI)