International Relations Prelims Question

The Khan Committee, set up by the Reserve Bank of India to harmonize the roles of the Development Finance Institutions (DFIs) and banks, has come up with the concept of universal banking, which allows them to compete with one another in all areas of business.
In its interim report, submitted to the then RBI Governor, Bimal Jalan, the Committee argued that distinctions between commercial and investment banking have become increasingly blurred with banks providing both working capital and term loans to corporates and DFIs competing with commercial banks for deposits (although they cannot accept short-term deposits). Therefore, the Committee argues, DFIs should be given banking licences eventually and until then they should be allowed to establish 100 per cent banking subsidiaries, while they continue to play their present role.
The Khan panel believes that the synergies unleashed by such consolidation will help Indian institutions compete in the international financial market. Interestingly, the panel suggests that since DFIs in India are increasingly operating on commercial, as opposed to developmental, considerations, the Government/RBI should provide appropriate levels of financial support, if they are to assume any developmental obligations.

The Khan Committee, set up by the Reserve Bank of India to harmonize the roles of the Development Finance Institutions (DFIs) and banks, has come up with the concept of universal banking, which allows them to compete with one another in all areas of business.
In its interim report, submitted to the then RBI Governor, Bimal Jalan, the Committee argued that distinctions between commercial and investment banking have become increasingly blurred with banks providing both working capital and term loans to corporates and DFIs competing with commercial banks for deposits (although they cannot accept short-term deposits). Therefore, the Committee argues, DFIs should be given banking licences eventually and until then they should be allowed to establish 100 per cent banking subsidiaries, while they continue to play their present role.
The Khan panel believes that the synergies unleashed by such consolidation will help Indian institutions compete in the international financial market. Interestingly, the panel suggests that since DFIs in India are increasingly operating on commercial, as opposed to developmental, considerations, the Government/RBI should provide appropriate levels of financial support, if they are to assume any developmental obligations.

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