Former RBI governor C. Rangarajan has urged the central bank to provide incentives to encourage the establishment of more small finance banks (SFBs). He said these banks are expected to mature into universal banks in the long run.
Rangarajan also raised concerns about the consolidation of regional rural banks (RRBs), suggesting that this trend could dilute their local character and regional focus.
Additionally, he stated that self-help groups are now being used as instruments within government projects.
For taxpayers and the financial system, the implications include potential changes in access to credit for small borrowers, regional banks’ ability to meet local needs, and the alignment of government programmes with microfinance channels such as SHGs.
