Experts warn on banking handed over to corporates – Strict monitoring is needed before approval

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The RBI has allowed private promoters to enter the banking business almost 27 years after 1993, but there are still different opinions about the bank operations of corporates. Stakeholders (including three of the 10 members of the RBI’s internal working group who favored the entry of business groups into banking last week) reported that these companies could capitalize as per requirement, business experience and managerial capability Will enter the banking sector with. However, he expressed concern over the monitoring of the grant of the loan (party lending).

Chandra Shekhar Ghosh, MD and CEO of Bandhan Bank, among the experts, said, “There is a need for more banks for development in the financial sector. There may be no other people than corporates who can start a bank. To reach more people for financial inclusion in our country, you need more banks. In this context, both private companies, corporate or non-corporate, can be licensed. ”

Asked whether you supported the entry of corporate houses in the banking sector? Abijar Dewanji, Partner at Banking EY India, replied, “Yes … correctly and subject to the associated risk norms.” According to him, the Banking Regulation Act would further strengthen control.

At the same time, Ghosh believes that the regulators will have to introduce new restrictions, different types of supervisory systems till the problems can be dealt with. “You cannot say that people of this group cannot come,” said Ghosh. Many of these people are quite good. Their companies are also good in terms of governance. ”

In fact, the IWG had proposed an amendment to the Banking Regulation Act to further improve the supervisory system before the entry of corporate houses in the region. However, former RBI Governor Raghuram Rajan and Deputy Governor Viral Acharya criticized the working group’s proposal. Prior to this, former Governors YV Reddy, D Subbarao and many RBI officials (former and in-service) had warned about corporates’ entry in this area.

By the way, many kinds of arguments were made about the entry of corporates in the banking sector. Among them, Naushad Forbes, former president of CII and co-chairman of Forbes Marshall, had said, “Why not? If good businessmen are running good companies and they make good banks, then the country will benefit from it. But there should be a clear and clear line between banking and our business. There should be limited shareholding. The institutions associated with the group should not be given any loans.

A former deputy governor of RBI, on the condition of anonymity, said- RBI is working very close to the central government these days. RBI is implementing what the government wants. This is just an initial proposal. The decision has to be taken by the RBI and the Banking Regulation Act needs to be amended.

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