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Updated: November 8, 2010 02:10 IST

Review move for new banks: Isaac

Staff Reporter
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T.M. Thomas Isaac says the loan policies of private banks favour private financiers.
T.M. Thomas Isaac says the loan policies of private banks favour private financiers.

Kerala Finance Minister T.M. Thomas Isaac has demanded that the Union government and the Reserve Bank of India review the decision to give licences to more new-generation banks and monitor the functioning of such existing banks.

At a delegates' session of the State conference of the Bank Employees' Federation of India (Kerala) here on Sunday, Dr. Isaac said several banks that were set up by small-scale entrepreneurs were gradually taken over by major players, which, in turn, exploited whatever resources these small-scale set-ups had. The experience of Lord Krishna Bank was a classic example.

Several associations in the banking sector had expressed apprehensions and put forward suggestions with regard to the functioning and loan policies of these private banks. The RBI should take these seriously. Several new-generation banks were giving loans only to fly-by-night chit fund operators and other private finance firms. Some had even issued circulars that loan requests for amounts below Rs.2 crore need not be entertained.

The Centre's approach to the situation, by issuing licences to more such banks, coupled with its flawed economic policies, would only distance the Indian public from the banking sector and pave the way for informal banking to gain precedence. On the other hand, the microfinance sector, which would be a major player when informal banking took over, was also facing challenges with several vested interests trying to derail the smooth functioning of several successful microfinance enterprises. He said the Congress-supported Janasree Mission was threatening to upset the successful microfinancing model of the Kudumbasree Mission.

Cautioning against the entry of industrial capital into the banking sector, the Finance Minister said Indian capitalists and imperialists were thriving at the expense of the Indian public sector.

Keywords: Thomas Isaac

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