The former finance minister said it “is part of a deeper game plan to control the banking industry.”
New Delhi:
Former Finance Minister P Chidambaram has harshly criticized the Reserve Bank’s proposal to allow companies to enter the banking sector and establish banks, calling it a “dangerous agenda” that is “part of a deeper game plan to control the industry. bank “. , making the RBI the “cat’s paw”. If this proposal is implemented, he said it would place a portion of the country’s vast economic resources in the hands of the business sector.
“The total deposits in the banking industry is on the order of Rs 140 lakh crore. If commercial enterprises are allowed to own banks, with a small capital investment, they will control large amounts of the nation’s financial resources,” Chidambaram said. . in a video that has been widely disseminated on social media.
This, Chidambaram said, was “another example of the Modi government indulging the aggrandizement and acquisitive ambitions of the Indian trading houses.”
“If the proposal is approved, it is no secret which politically connected business enterprises will obtain the first licenses and increase their monopoly power,” he added.
Former Reserve Bank Governor Raghuram Rajan and former Lieutenant Governor Viral Acharya have harshly criticized the proposal that was made public last week.
“It will further increase the concentration of economic (and political) power in certain business houses,” they said in a LinkedIn note Monday, referring to the proposal that was part of the proposed banking reforms.
Although the government needed more banks, it was unwise to allow industrial companies to enter the bank, as the history of such interconnected loans showed that it could be disastrous, they said.
S&P Global Ratings also criticized the idea, saying it was “fraught with risk.”
“Dr. Rajan and Dr. Acharya have given compelling and compelling 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 has been presented to people as if had the imprimatur of experts and the backing of the RBI, “said Chidambaram, explaining how around the world, especially in developed economies, strict rules are followed to maintain the neutrality of banks.
These include broad-based equity participation that reflects shareholder democracy; strict separation of ownership and management, where ownership with shareholders and management is in professional hands; and the ban on connected loans, building a wall between lender and borrower, he said.
Congress, he said, condemns the proposal and demands that the government declare that it has no intention of following it.
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