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Updated: August 2, 2013 23:43 IST

RBI chief defends move to allow corporates into banking space

Special Correspondent
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D. Subba Rao
The Hindu
D. Subba Rao

‘The Bank determined that it [allowing corporates] would be net positive’

Reserve Bank of India Governor D. Subbarao, on Friday, defended the central bank’s decision to make corporates eligible for bank licences, saying that responsible regulation involved being “pragmatic” and not “dogmatic”.

Elaborating on what he called responsible regulation, the RBI Governor said an important characteristic of such regulation was open-mindedness and the willingness to change regulations to suit the changing circumstances. In this context, he defended the RBI’s decision to make corporates eligible for bank licences, which was done after extensive debate, consultation and deliberation.

“The Bank took a pragmatic view, in response to the changed situation, and determined that allowing corporates into banking sector would be net positive,” he said. Dr. Subbarao was delivering the keynote address themed “Responsible innovation and regulation in the financial sector” at the Institute of Development and Research in Banking Technology (IDRBT) Technology Excellence Awards 2012-13 & the CEO Panel here on Friday.

The argument against allowing bank licences to corporates centred around “misuse” of public deposits for private gain and that banking in hands of the corporates would lead to concentration of economic power and political influence. The bank, however, took the decision to leverage the proven entrepreneurial talent and management expertise. Coupled with this was the scope for bringing in vast pools of capital that would help in strengthening financial inter- mediation.

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When foreign Banks operating in India does not have any such restrictions on ownership, why should we penalise Indian Banks with 10th centuary restrictions. RBI has done the right move to allow Indian Corporates to run Banks.

from:  Gopal
Posted on: Aug 3, 2013 at 13:03 IST

What can be said further when it has been stated by a person no less than the Governor of the RBI affirming that theirs(Corporates)entry have been "determined" to be net positive.It will be premature to draw any inferences as of now whether such Corporate controlled banks will be discharging their social obligation to the extent what a nationalised bank is expected to play or rather forced to play.Well; will in that case has a separate class of regulation also been "determined" for these seperate class of bankers?Broad basing the banking sector may be a positive move but shortshrifting the associated misgivings that have sprang up from their unscrupulous business practices leading to coruption may prove to be counterproductive.

Posted on: Aug 3, 2013 at 11:04 IST
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