On June 12, 2020, an Internal Working Group was set up by the Reserve Bank of India to review the current licensing and regulatory guidelines regarding ownership and control of banks in India. This working group shared its report on the RBI website last week for comments. Its most significant recommendation was that corporate houses could be given banking licences.
Former RBI governor Raghuram Rajan and former RBI Deputy Governor Viral Acharya have, in a blogpost titled “Do we really need Indian corporations in banking?”, strongly criticised the RBI report, asking whether there is any need to open up the banking sector to corporate houses now; what new information has prompted a need for a change in our bank-licensing guidelines?
So, why is the RBI interested in allowing corporate houses into the banking sector, and what are the risks involved? We explore these questions in a discussion with Vivek Kaul , well-known business columnist and author of five books, including the bestselling Easy Money trilogy. His most recent book is called Bad Money: Inside the NPA Mess and How it Threatens the Indian Banking System .
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