The Congress on Tuesday strongly opposed a proposed move of Reserve Bank of India (RBI) to allow corporate houses to enter the banking sector and set up banks. Its senior leader and former Union Finance Minister P. Chidamabaram said it would “reverse” the gains made in the past 50 years.
At a virtual press conference, Mr. Chidamabaram and party general secretary Randeep Surjewala accused the Union government of “pushing” its agenda through RBI, and appealed to other political parties and trade unions to join the Congress in opposing the move.
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The party asked the government to “unequivocally” declare that it had no intention to pursue the proposal.
Mr. Chidambaram said everyone knew which “politically connected corporate houses will get the first licence” if the proposal goes through.
“The proposal, ostensibly based on a report of an RBI Internal Working Group [IWG] has the fingerprints of the Modi government written all over it. This proposal, along with some other recommendations, is part of a deeper game plan to control the banking industry. The proposal, if implemented, will completely reverse the enormous gains made in the last 50 years of retrieving the banking sector from the clutches of business houses”, Mr. Chidamabaram said in his opening statement.
“It is not the RBI’s idea. The RBI is used or misused to push the government agenda... The opaqueness leads us to believe it is entirely Mr Modi ji idea”, he stated.
The total deposits in the banking industry was to the tune of ₹140 lakh crore. If business houses were allowed to own banks, with a small equity investment, they would control very large amounts of the nation’s financial resources. “This must not happen and the Congress will strive its utmost to ensure that this will not happen”, he said.
Three principles
All over the world three principles guided bank licensing: broad-based shareholding to reflect a shareholder democracy; strict separation of ownership and management; and prohibition of connected lending or creating a wall between the lender and the borrower. “All the three principles will be thrown out of the window if corporates and business houses are allowed to set up banks”, he noted.
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Mr. Chidamabaram pointed out that former RBI Governor Raghuram Rajan and former Deputy RBI Governor Viral Acharya had opposed the proposal. “It is shocking that such an idea should have been presented to people as though it has the imprimatur of experts and the endorsement of the RBI”, he observed.
Former Congress chief Rahul Gandhi said in a tweet, “Chronology samajhiye [understand]: First, karz maafi [loan waiver] for few big companies. Next, huge tax cuts for companies. Now, give people’s savings directly to banks set up by these same companies”.
