The recent draft guidelines issued by RBI on ownership and governance in private sector banks have generated a lot of debate. These guidelines indicate that the central bank wants to ensure that undesirable elements are kept out of the system. However, banks require more funds for future growth; if these guidelines are implemented, additional capital infusions will not be easy in coming days and banks could face a roadblock especially if they are applied retrospectively.

The banking industry in India has witnessed many changes since the economic reform process was initiated a decade ago. There is no doubt that the industry has been playing an important role in the growth of the economy. Initially during the reform process, in order to meet the capital adequacy levels, the government contributed significantly to the equity of public sector banks. Subsequently, it decided to grant licenses to private banks, which helped to introduce technology in a big way. Since then, the banking industry has continuously witnessed new trends. The low levels of NPAs, healthy balance sheets and of course an improved regulatory mechanism mean that banking industry in India is now internationally recognized.