The world knows that the most profitable business in the world (since Shylock’s times!). Banks have seriously huge margins – just see them borrowing at the bottom from absolutely lazy guys like me (SB a/c 4%) and lend it to absolutely lazy guys who do not even know how to borrow by lending at 25% p.a.

Obviously all the money is not borrowed at 4% nor is all the money lent at 25%. The latest RBI directive of freeing savings bank account interest rates is also likely to increase the cost of the so called ‘cheap’ funds – (CASA balances as bankers refer to it) more expensive.

Then why do we need so many new banks? Simply because in this age of specialisation all our banks look alike. It is high time we had specialized banks – catering to rural rich, rural poor, urban rich, urban poor, urban middle class, traders, manufacturers, long term funding, etc. etc. For those who have done some research it is amazing to see the kind of financial costs that the poor pay. For example it is common to find among the poor – safekeeping charges of 20-30%p.a. for their cash! They still find it CHEAPER because in the house it might get stolen or ‘used’ by a brother, sister, father…etc!!

Unless the RBI takes its ‘development’ role seriously it will continue to tinker with the CRR, SLR, SB account interest etc. but India will continue to be terribly under banked for 90% of the population, and terribly over banked for 10% of the population. High time that RBI brought back the VRS for banks (the pension and the VRS are very, very attractive for the existing employees), created new banks – with differential net-worth requirements depending on what they want to do, monitored the mis-selling of non bank products, ….and not just rest on the laurels saying ‘we have managed the economy better than many other countries’. No doubt they have. What we will not know is how much have they missed.