As part of the planned reforms to the nation’s banking sector, S&P Global Ratings said that on Monday that the proposal by both the Indian Central Bank Board to enable big manufacturing conglomerates to established banks is full of risks. Such risks could be very damaging for a country like ours, considering the current financial situation.
A Reserve Bank of India(RBI) review panel proposed a range of reforms, specifics of which have been publicly disclosed last week, including enabling industrial houses to operate as being so bank promoter, suggesting how they could cause a huge stake in a borrower. With such high stakes, diving into a pool of already flooded economy could harm the structure and the economic base of it. In fact, the dangers could even be quite grave f they have gone unnoticed or untreated.
“There was a note that stated, concerns of conflicts that could be potential in reference to investments, economic security, multinational corporations and so on. Corporate ownership of banking raises the chances of inter-group borrowing, fund transfer, and potential financial exposure, S&P said, explaining that if industrial groups are now at the helm of even a bank, the threat of contagion from company defaults would also increase significantly.
Last week because of a “significant degradation” in its economy, India put a personal loan under suspension for a month.
In the business sector, non-performing assets (NPAs) stay steady even while they have decreased from 18% in March 2018 towards 13% in March 2020, S&P stated.