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No decision yet on giving bank licenses to corporates: RBI Governor

The RBI monetary policy committee left its benchmark repo rate unchanged at 4%

Reserve Bank of India (RBI) Governor Shaktikanta Das addresses a press conference, at RBI headquarters in Mumbai | PTI Reserve Bank of India (RBI) Governor Shaktikanta Das addresses a press conference, at RBI headquarters in Mumbai | PTI

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said the central bank has not taken any decision to allow corporates to get bank licenses.

The RBI had constituted an internal working group in June to review extant ownership guidelines and corporate structure for Indian private sector banks. The IWG recommended that well run large NBFCs, with an asset size of Rs 50,000 crore and above, including those which are owned by a corporate house, may be considered for conversion into banks provided they meet certain conditions. Large corporate and industrial houses may also be allowed as promoters of banks, only after necessary amendments to the Banking Regulations Act and strengthening of the supervisory mechanism for large conglomerates, the report had added.

The report faced criticism from various circles including past RBI governors and opposition political parties. Former RBI Governor Raghuram Rajan and former Deputy Governor Viral Acharya said that allowing corporate entry into banking would “further exacerbate the concentration of economic (and political) power in certain business houses.”

Das clarified that it was a report by an internal working group of RBI and should not be seen as the central bank’s point of view.

“The internal working group had two external members, who are also members of the RBI central board and the internal working group has acted independently. They have had their independent deliberations. They have given a certain point of view. RBI has not taken any decision on these issues so far,” he said.  

He further said that RBI’s approach would remain consultative. “The report of the IWG is now in the public domain. We will receive comments. After getting comments from various stakeholders and others who wish to give their comments to us, we will examine the whole matter and take a considered decision,” he added.

The RBI monetary policy committee on Friday left its benchmark repo rate unchanged at 4 per cent, even as it would continue to maintain an “accommodative” stance as long as necessary.

Even as the MPC flagged high inflation for its decision to keep interest rates on hold, Governor Das said the paramount objective was to support growth. He however, has clarified that the RBI has not given up on its inflation targeting mechanism.

“RBI is a multi-purpose central bank. It is not just an inflation targeting central bank. Inflation targeting is very important. It is part of RBI preamble. At the same time, the RBI has a role as a banking sector, non-banking sector regulator, as the regulator of payment systems and so many other responsibilities,” he said in an interaction with reporters.

 Das also stated that the central bank has strengthened its supervisory systems in recent years. In the past nine months, the RBI has had to come to the rescue of two private sector banks. The Yes Bank board was superseded by RBI in March and eventually was rescued after the country’s largest lender SBI and a few other banks invested in it. Last month, another troubled bank Lakshmi Vilas Bank was taken over by RBI and merged it with DBS Bank India, a wholly owned unit of Singapore’s DBS Bank.

“These two incidents of two banks where we had to intervene and resolve, not as if they happened one fine morning and we were not aware of what is happening. Our first focus is to work with the management of the bank and resolve the problem. Only when we see a need for regulatory intervention, in the best interest of the depositors, we intervene,” he said.

Unification of supervisory departments, strengthening the off-site monitoring and surveillance,  large scale usage of analytics and IT are some of the measures taken to strengthen RBI’s supervision, deputy governor MK Jain said.

Even as the RBI has bailed out two private banks, the fate of Punjab and Maharashtra Cooperative (PMC) Bank, which was put under administration last year, hangs in the balance and depositors are still awaiting for a full resolution.

“The situation in PMC Bank was completely different. It has called for expression of interest from possible investors who would like to invest and take over the bank. The last date of submission of expression of interest is December 15. So, let us see what is the response and after that only we can take a view on this,” said Das, adding that the initial response looked positive.

 

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