Former Reserve Bank Governor Raghuram Rajan and former Deputy Governor Viral Acharya have criticized the recommendation of allowing corporate houses to set up banks. Both say that in today’s situation this decision is shocking and a bad idea. Rajan and Acharya said in a joint article that it is better to leave this proposal now.
Significantly, an internal working group (IWG) constituted by the Reserve Bank made several suggestions last week.
The Internal Working Group constituted by the Reserve Bank of India has proposed to allow big companies to become promoters of banks after necessary amendments in the Banking Regulation Act. Not only this, the Working Group has also proposed to convert large non-banking financial companies (NBFCs) into banks. RBI will issue the final guidelines based on this report
The biggest thing in these recommendations is that it has been advocated to grant banking licenses to non-banking financial institutions (NBFCs), which have assets of more than Rs 50,000 crore and have a track record of at least 10 years as well as large Industrial houses can also be allowed to run banks.
