scorecardresearch
Thursday, March 28, 2024
Support Our Journalism
Home50-Word EditRajan, Acharya right to oppose corporates into banking. RBI's poor regulation makes...

Rajan, Acharya right to oppose corporates into banking. RBI’s poor regulation makes move risky

ThePrint view on the most important issues, instantly.

Follow Us :
Text Size:

Opposition to allowing corporates into banking is well-founded. RBI’s poor regulation of banks, inconsistent corporate governance standards, lack of resolution mechanisms make the move risky. It could hurt depositors, force more government bailouts. Raghuram Rajan and Viral Acharya are right to suggest this proposal is “best left on the shelf”.

Subscribe to our channels on YouTube, Telegram & WhatsApp

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

4 COMMENTS

  1. A comment that is being floated is that the corporate that starts a bank will use cheap public money to finance its own projects. Well, if the corporate is a respectable and trustworthy one like the Taras, Bajaj or L&T, such a situation should be welcome, because a corporate that is sound and reliable like the ones mentioned above, will become more strong and successful if it can get credit at 4% interest instead of 14%. Thus benefitted, the entity can even offer 6% interest on savings accounts to public instead of the customary 3.5%.

    The catch will be, WHICH corporates are allowed to open a bank. Credibility of an Anil Ambani or Adani cannot be as sound as the few names mentioned above.

  2. All countries go through their Chaebol phase. For America, it was at the turn of the last century. Columnist Andy Mukherjee voices the concerns of many when he sees a new concentration of economic power emerging, with the first letter of the alphabet. With so many regulatory institutions – SEBI, to name just one, or those focused on sectors like TRAI – it should not have been thus. If the corporate sector were doing well across the board, with high standards of governance, Dr Rajan may not have been apprehensive if a dozen business houses set up banks. Put Ideology in the Commander’s seat and don’t expect the flight to land in the First World.

  3. My view is different. Banks need to be owned by entities with strong balance sheets. None, at the moment, looks stronger than GoIs, simply because we have mercifully no personal experience of a sovereign default. However, the fifty year record of government ownership of two thirds of the banking system is dismal. Abysmal since the NPA crisis brought on by reckless lending for infrastructure and excesses by many leading groups. New private banks are needed. The fear of these respected central bankers – well founded in New India – is that this space too will be captured by the cronies.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular