demand for banking services and consequently, to offer wider menu choices. gearing up for competition 4. one inevitable outcome of the changing banking structure will be that the industry would have more players but simply bringing in more players would not make the banking industry more competitive. it is not as if there is lot of concentration in our banking industry. in fact, india scores over many of its peers as well as several advanced countries when it comes to concentration within the industry. concentration measured by top three banks in total banking assets is just under 30 %. this compares well with other countries. for germany and japan, it exceeds 75 %, while that for china, brazil, uk and france it exceeds 50 % and for the united states it is just over 35 %. herfindahl index, a measure of concentration ratio, shows that concentration is low and the index normalized to a range of zero to unity reads 0. 040 for march 2013, down from 0. 065 in march 2000. apart from concentration, on several other parameters the sector appears fairly competitive. interest rates, both on deposit and lending side are essentially deregulated. branch licensing has now been freed subject to certain well - founded interventions to ensure that under - banked rural areas are not neglected. foreign banks can seek licenses on tap. we plan to move in similar direction for private sector banks with passage of time after seeing the outcomes of the current initiative. 5. however, even with these developments, the banking industry cannot be considered truly competitive. the reason for that is the major players have not really started competing with each other. it is only when the dominant players in any business segment start to compete against each other that the consumer truly benefits in terms of prices and quality of service. this sadly is not the case in our banking sector. in my opinion, the bigger and stronger players would not be averse to competition as the new banks are not likely to threaten their position at least in the medium term. the stronger players would rather use this opportunity to further consolidate their position by innovating and improving their internal systems and processes. as i said before, if the customer experience in terms of quality of service and charges has to improve in this country, it can only happen through competition amongst the bigger banks. therefore, i would request the doyens of the industry present here, who represent the top public, private and foreign sector banks in the country, to begin a healthy competition amongst them. 6. it is not

agencies, have continuous dealings with each other, which tends to reinforce the exercise of their oligopolistic power over markets. further, operations of international banks / conglomerates specialising in cross - border flows, combining traditional banking and risky investment banking operations, have close business and operational links with rating agencies, accounting firms, etc. the concentration of global financial power in a few entities with close mutual connections has considerable potential to undermine competitive forces. in assessing the competitive efficiency of global financial markets, it may be useful to make a distinction between the role of multinational banks which have subsidiaries or branches in different countries but predominantly operate in domestic markets, and that of international banks which specialise in cross - border financial activities, especially flows on capital accounts, both short - term and long - term. experience has shown that multinational structures that relied less on wholesale funding and forex swap markets have been less vulnerable to crises. international banks are able to operate across different financial markets and countries with significant divergence in fiscal regimes as well as regulatory regimes. they have often been found to deal in financial flows of suspect legality in one country, though not always in both countries involved. international banks have the opportunity and incentive to conduct operations involving tax avoidance. because of these operations, international banks enjoy significant influence over the political economy in several countries. in the prevailing environment of global financial markets, some large global financial conglomerates are larger and, perhaps, more powerful than some of the central banks. it is clear from the experience of the euro area that, in effect, the sovereign becomes the source of extraordinary intervention as the ultimate risk bearer in times of crisis. the problem arises when the sovereign ’ s capacity for such intervention is constrained by globalisation : this may be beneficial in many respects, but it could undermine the capacity of the sovereign to tackle the financial sector problems that arise. the conduct of fiscal policy itself is dominated by consideration of the view of global financial markets on the sovereign ’ s solvency and its capacity to support the financial sector under distress. extraordinary intervention by the sovereign and related fiscal measures are thus subject to the credit rating agencies ’ appraisal of their solvency ( sen, 2012 ). these considerations may have a bearing on the conduct of both financial sector regulation and macro policies at the national level. in brief, my submission is that the prospects for credible and acceptable global governance arrangements to ensure a workable global economic policy and environment within which global finance could contribute to growth and stability, do not appear very bright