Should the RBI Allow Corporate Houses to Own Banks?

  • Should the RBI Allow Corporate Houses to Own Banks?

Should the RBI Allow Corporate Houses to Own Banks?

"In sum, numerous technical rationalisations proposed by the IWG are worth adopting, while its main recommendation - to allow Indian corporate houses into banking - is best left on the shelf", they opined. The party accused the Modi government of pressuring RBI to make such a proposal and said it would oppose "the deeper game plan of the government".

"This is a complete retrograde and it has got very serious consequences", he added.

The RBI's internal working group recently recommended that large corporate/industrial houses may be allowed as promoters of banks, promoters' stake in the bank's equity share capital can be increased from 15 to 26 per cent, and large non-banking finance companies owned by the corporate houses can be converted as full-fledged banks, among others.

He alleged that the decision was "opaque" and "the opaqueness leads us to believe this is entirely Mr Modi's idea". They also cited the Yes Bank crisis as a limitation of the central bank to gather information on loans. Next, huge tax cuts for companies.

The former finance minister claimed at an online briefing that the proposal was not RBI's idea.

The Congress on Tuesday appealed to all political parties, trade unions and the general public to support its opposition of the government.

"Why now? Have we learnt something that allows us to override all the prior cautions on allowing industrial houses into banking?"

"It is on record that the idea, when first mooted, was opposed by all".

The senior Congress leader alleged the RBI did not make the recommendation of demonetisation on its own and the Modi government "forced" the recommendation on it. Chidambaram also alleged that the Centre was misusing a respected institution like RBI to promote its risky agenda.

In Maharashtra, around 30,000 bank employees from 10,000 bank branches of public sector banks, old generation private sector banks, regional rural banks and foreign banks are observing the strike, the release said.

"India has seen number of promoters who passed fit & proper test at the time of licensing but then turned rogue", they reminded.

"It's a positive move with which a corporate house can balance and cater to all sections of the society including stressed businesses in SME/MSME and serve better as ultimate objective will be growth and value creation in the changed formal business banking environment, " he added.

"We know who will get the first licences. It is unfortunate that instead of learning lessons, the RBI is proposing to hand over banking licence to corporate and business houses", Raja said.

"Corporate and business houses should not be allowed entry into the banking sector and not be given licences to set up banks", he said.

The former RBI officials also point out that the Internal Working Group or IWG itself notes in its appendix that a majority of experts consulted by the panel were of the opinion that large corporate groups and industrial houses should not be allowed to promote a bank - and yet the final recommendation made by the committee is the opposite. First, it was the country's biggest cooperative bank, PMC Bank, then YES Bank and now, Lakshmi Vilas Bank.