Former finance minister P Chidambaram has issued a blistering criticism of the Reserve Bank’s proposal to permit corporates to enter the banking sector and arrange banks, calling it a “dangerous agenda” that’s “part of a deeper game plan to control the banking industry”, making the RBI the “cat’s paw”. If this proposal is carried out, he stated it will place a bit of the nation’s huge financial assets within the arms of the company sector.
“The total deposits in the banking industry is of the order of Rs 140 lakh crore. If business houses are allowed to own banks, they will, with a small equity investment, control very large amounts of the nation’s financial resources,” Mr Chidambaram stated in a video that has been broadly circulated on social media.
This, Mr Chidambaram stated, was “another example of the Modi government pandering to the aggrandizement and acquisitive ambitions of the business houses of India”.
“If the proposal goes through, it is no secret which politically connected business houses will get the first licences and increase their monopolistic power,” he added.
Former Reserve Bank Governor Raghuram Rajan and former Deputy Governor Viral Acharya have strongly criticised the proposal made public final week.
“It will further exacerbate the concentration of economic (and political) power in certain business houses,” they stated in a LinkedIn word on Monday, referring to the proposal that was a part of the proposed banking reforms.
Even although authorities wanted extra banks it was not sensible to permit industrial homes into banking because the historical past of such inter-connected lending confirmed it may very well be disastrous, they stated.
S&P Global Ratings has additionally criticised the thought, saying it was “fraught with risk”.
“Dr Rajan and Dr Acharya have given cogent and convincing reasons why the idea is totally retrograde and why it will lead to concentration of economic and political power. It is shocking that such an idea should have been presented to the people as though it has the imprimatur of experts and the endorsement of the RBI,” Mr Chidambaram stated, explaining how internationally, particularly developed economies, strict guidelines are adopted to take care of neutrality of banks.
These embody broad-based shareholding reflecting shareholder democracy; strict separation of possession and administration, the place the possession with shareholders and the administration is in skilled arms; and prohibition of related lending, constructing a wall between lender and borrower, he stated.
The Congress, he stated, condemns the proposal and calls for that the federal government declare that it has no intention of pursuing it.