Chennai: Former RBI governor C Rangarajan on Monday urged the central bank to incentivise the setting up of more small finance banks (SFBs).In his address after inaugurating Equitas Small Finance Bank’s Equitas Towers here, he said 11 SFBs are currently operational in the country. “I believe SFBs will have a role to play. All SFBs aspire to become universal banks. I am not complaining, but the fact of the matter is that all spinoff SFBs ultimately want to become universal banks. But certainly, I think the RBI must think about how to incentivise the setting up of SFBs,” said Rangarajan.“I understand that SFBs have an obligation to fulfil the same set of conditions as universal banks. Therefore, unless some set of people are motivated by other considerations, the initiative for setting up SFBs will not be there. So, I would appeal to the RBI to look at how to incentivise the setting up of SFBs,” he added.He also raised concerns over the consolidation of Regional Rural Banks (RRBs). “The number of RRBs has come down. To me, this is a step in the wrong direction. It essentially takes away the local and regional character of these banks, and ultimately, they may get merged with universal banks as well,” Rangarajan said.Noting that Self-Help Groups (SHGs) are a model in which people come together to produce or manage something, he said, “Now, virtually what has happened is that the SHGs have become mere instruments for fulfilling some of the government projects.”“This is also, in my opinion, counter to the spirit with which the SHGs were established,” he added.
