The law of privatization of banks happened back in 1993 but since then privatization is not welcomed with open arms by some officials. The issue of corporates running the bank is still a huge debate. Many believe it will exploit the banking sector and will give too much power in the hands of shareholders. They believe they might misuse the depositor’s money as it has already happened in the past. But shareholders share a different opinion. According to them, corporates can bring much-needed capital to the banking sector and can provide managerial assistance as well.
RBI for the past two decades is not allowing the entry of corporate houses in the banking sector. They feel they might use the bank as a fund pool and misuse it.
Many experts like Macquarie capital have advised RBI to exercise caution regarding this matter, even if the internal system of RBI put forth the suggestion of corporates.
Especially, in these times when the banking sector is sinking, it becomes all the more important to think about this matter carefully. Former RBI governor Raghuram Rajan and Deputy Governor Viral Acharya shared their thoughts on corporate houses entering the banking sector by taking a negative stance. They believe that if we look up the history of connected lending, it is disastrous, and how one can expect a bank to make good loans when it is sort of owned by a borrower?
But there were some arguments which were in favour of corporates running the banks.
And guess what these arguments came from the corporates themselves.
According to Naushad Forbes, Co-Chairman of Forbes Marshall & Former President of CII, the country will greatly benefit if good businessmen will run the banks. He doesn’t seem to have any issue with corporates running the banks. Of course, there needs to be a clear cut line between operating banks and other businesses of that individual.
This debate between the corporates and the government officials is going on from ages and no good or beneficial result is found yet. We, as the customers can only expect something beneficial for the country and ourselves.