Recommendations on New Banking License Schemes

The country is in need of a new class of promoter-driver and smartly governed private banks, this was contrary to the statements made by Rajan and Acharya. Rajan was the governor of RBI and Acharya was the deputy governor. Even though both of them are not in a leadership position now, their opinions are discussed widely.

The Internal Working Group of RBI made a recommendation that large corporates and industrial houses may promote the banks. The deposits taking commercial banks are referred here. There is no referring to the non-depository bodies. Rajan and Acharya made points on what will happen if the big industrial houses are given banking licenses.

Firstly, taking a step like this would be forgetting the past failures that we have gone through. Therefore, we must always keep in mind what the past has taught us. Secondly, the need to stick with the existing limits on the banks was emphasized. Thirdly, there will be a concentration of high power with few of the corporates, which can be very damaging to the other smaller companies. It can also put the banks on the edge of failure.

They have firmly emphasized that India is not ready for such a big change and that it will only have negative impacts.


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