NEW DELHI: The recommendation to allow the entry of large corporate and industrial houses into banking was an independent proposal of the Reserve Bank of India’s internal working group, and should not be construed as the regulator’s point of view, according to RBI Governor Shaktikanta Das.
The working group had two external members who are also members of the RBI central board and the group’s suggestion has received sharp criticism from experts, who fear corporate bank ownership may put depositors’ money at risk.
In fact, the IWG itself had admitted that “all the experts it consulted except one were of the opinion that large industry houses should not be allowed to promote a bank.”
“It is a report by an IWG of RBI. They have given a certain point of view. it should not be seen as RBI’s point of view or decision and that has to be clearly understood,” said Das, adding the regulator’s approach is consultative.
For now, the working group’s report has been put in the public domain for comments. Notably, former central bankers such as Raghuram Rajan and Viral Acharya have also strongly opposed the move.
However, the IWG proposal had specified that such decisions should only be taken after the RBI’s supervisory arm is strengthened. RBI’s Deputy Governor MK Jain, who accompanied Das during the post-monetary policy meeting call, said that over the last two years the central bank has taken conscious steps to improve its supervisory function.
He added unprecedented steps have been taken within the supervisory wing such as unification of supervisory departments, strengthening the offsite monitoring and surveillance and usage of information technology and analytics tools.
Commenting on the resolution of PMC Bank, Das said “the initial response looks positive at this point of time.” Last month, the fraud-hit multi-state urban cooperative bank sought Expressions of Interest (EoI) for investment or equity participation in the bank for its reconstruction. The last date for submission of EoI by potential investors is December 15, Das said, adding “let us see what is the response”.