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Mumbai: Checking inflation is the immediate priority, India's new central bank governor said on Friday after assuming the top post.
"The immediate priority for me as the Governor of the Reserve Bank of India will be to manage inflation and anchor inflationary expectations," Duvvuri Subbarao told reporters just after taking charge.
In the short to medium term financial sector reforms would be a priority, he said.
On Thursday, the Central Bank said the prospect of India opening up its banking sector to foreigners next year is likely to spur consolidation among local banks, which may lead to a lessening of competition.
India is scheduled to release a review of its banking sector in April 2009, which is expected to cover whether to increase the limit on voting rights of foreign shareholders of local banks and whether to allow greater participation by foreign banks.
"The increased presence of foreign banks, by intensifying competition, could accelerate the consolidation process that is underway," the central bank said in its 2006-08 report on currency and finance.
"While this may be the positive outcome, it may, at the same time, also raise the risk of concentration," it said.
India's banking sector is fragmented, and the largest banks are small compared to foreign banks. The combined assets of India's five biggest banks were about half those of China's biggest bank, Bank of China Ltd, the central bank said in its 515 page report.
India had 79 commercial banks at the end of March. Of these, 28 were foreign banks, which held 10.1 per cent of the aggregate assets of the sector at the end of June, the RBI said.
There were also 91 regional rural banks, 1,770 urban co-operative banks and 12,834 non-banking financial companies.
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