Congressional leader Rahul Gandhi on Tuesday asked people to understand the “timeline” of the proposed measures to reshape the national banking industry in another blow to the Center. Gandhi was using a phrase from the Union Interior Minister Amit Shah to explain the Bharatiya Janata Party (BJP) plans to implement a National Citizens Register (NRC) nationwide. Shah had used “samajhiye chronology aap (understand the chronology)” last year.
“Samajhiye Timeline: First, karz maafi for a few large companies. Next, huge tax cuts for businesses. Now hand over people’s savings directly to banks set up by these same companies. #SuitBootkiSarkar, ”Gandhi wrote on Twitter.
The former president of Congress’s tweet is set against the backdrop of the proposal by an internal panel of the Reserve Bank of India (RBI) to allow large corporations to act as promoters of banks after the necessary amendments to the Bank Act. Banking Regulations of 1949 “to deal with related loans and exposures between banks and other entities of the financial and non-financial group.” The RBI panel also recommended increasing the limit on the participation of promoters in private sector banks to 26 %.
The central bank had set up an Internal Working Group (IWG) on June 12 this year to review the existing ownership guidelines and corporate structure of India’s private sector banks. The committee’s report was made public last Friday, and the RBI has requested comment by January 15, 2021, “before ruling on the matter.”
Well-managed large non-bank finance companies (NBFCs) with asset sizes of Rs 50 billion or more, including those owned by a corporate company, may be considered for conversion to banks, subject to the completion of 10 years of operations and compliance with due diligence. criteria and compliance with additional conditions specified in this regard, suggested the group.
However, several experts, including former RBI Governor Raghuram Rajan, warned against the move to allow large corporate companies to promote banks. “Why now? Have we learned anything that would allow us to override all previous precautions about allowing industrial houses to go into banking? We would say no. In fact, on the contrary, today it is even more important to stick to the tried and true limits. evidence on business involvement in banking, ”said a LinkedIn post by Rajan and former RBI Deputy Governor Viral Acharya.
They argued that since industrial houses need financing, they can easily get it, no questions asked, if they have an in-house bank. The history of such connected loans is invariably disastrous, they said, wondering how a bank can make good loans when it is owned by the borrower.
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