According to the S&P Global Ratings allowing corporates into the banking sector would only mean agitating with risk. It would further only concentrate and degrade the economic and political power in the hands of a few corporate houses. Even though India needed more banks but this conglomeration would only be like history repeating itself.
The Reserve Bank of India will be facing provocation while dealing with the corporate books on top of which the financial health of India still remains bleak and is at the helm of devastation.
However, this had its own advantages as well which would limit shadow banking leading to further better supervision. Many sources even claimed that the entry of corporate houses into banking will not essentially dampen and deteriorate the business environment in India.
But It points only towards privatization. Corporate houses are merely raved by the idea of growing a bank on their own, they seem to have only come by the idea of acquiring the public sector who have only been thrashed past the last couple of years. They need capital that the government is unable to provide. The entry of corporate houses if happens at all will only lead to privatization which will further erode question on the public forum regarding financial stability.
Former RBI governor and former Deputy Governor Viral Acharya mentioned this as a bombshell. India’s banking sector needs refinery and improvement but corporate houses owning banks set the entire thing on a backroad. Corporate houses owning banks will only lead to a disaster and this road will only lead to doom.
The stumbling risks included exposure to the safety net, interconnected lending, and the concentration of economic power.
The overall issue just raised one question that this roadmap just leads to the people worrying about the regulation of India, Who are eventually these regulators thinking for, is it for the people and their money or the corporates making the rich richer.