More banks or less?

More banks or less?

In an interview with Mint, the chairman of the newly empowered Competition Commission of India (CCI) says that he has written to the Reserve Bank of India, requesting it to keep the “competition perspective" in mind when regulating banks.

The CCI head says “there are anti-competitive activities (that are) not letting too many private banks operate in the country".

This is very interesting. For one, it suggests that the Indian banking market is not competitive enough. It is very common for bankers and RBI to talk about the need for mergers among Indian banks. The financial media, too, parrots these thoughts. But is the real challenge competition rather than consolidation?

CCI cannot tell RBI—and other sectoral regulators —what to do. But similar advisory notes could ensure that policy is designed with competition and consumer interest in mind. Similar attention is due in telecom, ports, airlines and many other areas.