In a paper, Raghuram Rajan & Viral Acharya have termed the recent recommendation of an RBI internal working group on allowing corporates into banking a ‘bombshell’.
To revive growth, former RBI governor Raghuram Rajan says India should be cleaning up the mess in corporate & financial sectors. Read the full text of the Off the Cuff interaction here.
Raghuram Rajan, former Reserve Bank of India governor and the Katherine Dusak Miller Professor of Finance at Chicago Booth was the guest at ThePrint's...
At ThePrint's OTC, the former RBI governor said if huge levels of debt and financial distress hold back the economy, it will be a lost decade for growth.
Loan losses from the pandemic may be too huge for the government to pay, says a new paper authored by the former RBI governor and former RBI deputy governor.
Fear of probe agencies investigating bad loans left a deep scar on banking officials, raising their risk-averse nature to lending. RBI wants Kamath panel to take care of those fears.
RBI Governor Raghuram Rajan also cautioned that corporations, households and governments will have enormous levels of debt as they move out of the pandemic.
According to government reply in Lok Sabha, the pilot phase of PMIS is being used to test concepts, strategies and systems before a full-scale implementation of the scheme.
Order for 87 MALE drones will be split between 2 Indian firms in 64:36 ratio to ensure there are 2 independent manufacturing lines with at least 60% indigenous components.
The India-South Africa series-defining fact is the catastrophic decline of Indian red ball cricket where a visiting team can mock us with the 'grovel' word.
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.
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.
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.
It is a good step because more competition amongst banks will improve public experience in the banking sector.
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.
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.
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.