The Congress Tuesday condemned the proposal of the Reserve Bank of India’s (RBIs) Internal Working Group (IWG) recommending the entry of business houses into the banking sector, saying it has the “fingerprints of Modi government written all over it”.
In a press statement, senior Congress leader P Chidambaram said the proposal, along with some other recommendations by the IWG, is part of a deeper game plan to control the banking industry by the NDA government at the Centre. If implemented, the proposal will “completely reverse the enormous gains made in the last 50 years of retrieving the banking sector from the clutches of business houses”, Chidambaram noted.
“If business houses are allowed to own banks, they will, with a small equity investment, control very large amounts of the nation’s financial resources. This must not happen and Congress will strive its utmost to ensure that this will not happen,” Chidambaram said.
Last week, an IWG set up by the RBI made various recommendations, including that a large corporate may be permitted to promote banks only after necessary amendments to the Banking Regulations Act. The proposal drew criticism from former Reserve Bank Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya, who said that all the experts consulted by the IWG except one “were of the opinion that large corporate/ industrial houses should not be allowed to promote a bank”.
Chidambaram said both Rajan and Acharya have given convincing reasons why the proposal will lead to concentration of economic and political power.
“Just as the RBI was the cat’s paw of the government in the saga of Demonetisation, the RBI is being used by the government to push through its dangerous agenda. This is another example of the Modi government pandering to the aggrandizement and acquisitive ambitions of the business houses of India. If the proposal goes through, it is no secret which politically connected business houses will get the first licences and increase their monopolistic power,” Chidambaram said.
“We call upon all the people of India and all political parties and trade unions to join us in resolutely opposing the retrograde idea of allowing corporates and business houses to enter the banking sector and set up banks,” he added.
Rajan and Acharya have raised concerns that if the industrial houses are allowed into banking sector, they could get the financing easily with no questions asked as they would have an in-house bank. It would also lead to further concentration of power with certain business houses, they had warned.
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