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Phoney Financial Inclusion

All talk of "financial inclusion" sounds hollow unless accompanied by a struggle for economic democracy.

Come January 2014, if the Reserve Bank of India (RBI) sticks to its timeline for the award of new bank licences, then a couple of entities of the country’s big corporate houses, for instance, Tata Sons, Aditya Birla Nuvo and Reliance Capital, could well be floating commercial banks. The RBI’s earlier (2001) guidelines did not permit the entry of corporate houses into banking. The new guidelines issued this year made them eligible to apply for bank licences. Of course, some of these corporate houses already have their own non-bank finance companies (NBFCs). So we will soon be “Back to In-house Banking” (see our edit, EPW, 19 October 2013) accompanied, this time, with the high sounding phraseology of “financial inclusion” and “inclusive growth”. How may this tide be reversed?

When a parliamentary standing committee on finance (whose report, “Policy on New Licences in the Banking Sector”, was released last month), in the course of its investigations, asked the then RBI governor D Subbarao to explain the change in policy, he was as vague as ever. Subbarao argued that the circumstances had changed – the financial sector, the corporate sector, “our understanding of regulation”, regulatory capacity, etc – and so the guidelines had to be revised. One would have expected him to refer to the changed circumstances since July 1969 when the government nationalised 14 large private-sector banks.

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