ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Back to In-house Banking

Issue of bank licences to corporate houses will be against the country's interests.

The issue of banking licences to the private sector, the third such occasion since 1994, has been put on an accelerated path of decision-making and licences are to be given by January 2014. The Reserve Bank of India’s (RBI) decision not to prohibit corporate/industrial houses from applying (unlike in 1994 and 2001) threatens to take us back to the days before bank nationalisation, when all big corporate houses had their own banks and all big banks were owned by corporate houses. Some of India’s biggest corporate groups – the Tatas, the Birlas and Reliance – are in the fray this time for new licences.

Banking in the pre-nationalisation era meant no more than mobilising funds from the public to promote the interests of a particular monopoly house. This not only concentrated economic power in the hands of these monopoly houses, but also denied credit to agriculture and other sectors which were outside their control, and thereby caused a skewed pattern of sectoral development. Besides, it put the depositors’ money, deployed non-transparently in accordance with the strategy of the particular house, under great risk.

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