Question

How can differentiation licencing solve the problems of public sector banks?

Answer 1

The Indian financial system currently consists of commercial banks, co-operative banks, financial institutions and non-banking financial companies (NBFCs).

The commercial banks can be divided into categories depending on the ownership pattern, viz. public sector banks, private sector banks, foreign banks.

While the State bank of India and its associates, nationalised banks and Regional Rural Banks are constituted under respective enactments of the Parliament, the private sector banks are banking companies as defined in the Banking Regulation Act. The cooperative credit institutions are broadly classified into urban credit cooperatives and rural credit cooperatives.