The controversy following the current publication of a report of an Internal Working Group of the RBI is not surprising, to say the least. For, it notes that all the specialists it consulted, barring a single, encouraged that industrial homes/corporates should really not be permitted to set up banks. Yet, the committee goes and does the opposite, that is, advise that significant industrial homes ought to be permitted to set up banks. Why?
Former RBI Governor Raghuram Rajan and former RBI Deputy Governor Viral Acharya suspect that the IWG report has carried out this to clear the path for a significant enterprise home to enter the banking sector. In the absence of proof, they speculate, not in contrast to journalists, to argue that otherwise there was no want for the RBI to come up with this extraordinary recommendation at this point of time. They surmise that an industrial home with a payments bank licence may well be keen to convert it into a bank.
While their guess is as very good as any person else’s, we are not in principle against the entry of significant enterprise into the banking sector. However, in the light of previous encounter when key industrial homes had owned banks ahead of their nationalisation in 1969, of course, for purely political motives, we as well would be concerned about the clear conflict of interest insofar as the promoter industrial group would favour his personal to lend funds mopped up from millions of smaller depositors.
Yet, this is not to deny that thanks to powerful regulatory supervision, huge foreign banks are closely linked to key enterprise interests. In brief, there can not be a blanket ban on the entry of significant enterprise into the banking sector. The problems lies with our weak and vulnerable regulatory program, which is not immune to political/corporate pressures. There is also speculation that some current Non- Banking Financial Companies could be permitted to transform into scheduled banks, but the problems once more is some of these NBFCs are currently closely linked to enterprise homes.
Besides, the scam in the ILFS and Yes Bank, promoted by qualified managers, would recommend that no a single is above abusing their position. Also, the mess in the public sector banks with ever growing non-performing loans is proof of the bigger malaise which leaves no institution, public or private, untainted by corruption and nepotism. The worry of concentration of wealth in a handful of hands is secondary to the lack of integrity in the program. Under the situations, the greatest course is for the public sector banks to divest significant so that the government remains in handle as the single biggest stake-holder with, say 15 per cent of equity, although remaining 85 per cent is extensively held by the Indian public. Why the Modi Government is shying away from such a sensible course defies logic.
Rest in peace, Ahmed Patel
The death of Ahmed Patel from Covid-19 complications arising is a significant blow to the established order in the Congress Party. A low-crucial leader who exuded immense energy in the UPA decade, his proximity to Congress President Sonia Gandhi as her longtime political secretary created him handle each the celebration and the government devoid of his holding a formal workplace. Ahmedbhai, as he was popularly named, was a quintessential backroom manager. He pulled irons from the fire for her, acted as a bridge amongst her and the celebration and also with other UPA constituents.
Informally, he exercised tremendous handle more than investigating agencies such as the CBI, ED, and so on. He did what Home Minister Amit Shah is supposed to be carrying out in the present government but devoid of any fanfare. Of late, his hold more than the celebration had weakened somewhat due to the slow but specific transformation underway, from Sonia Congress to Rahul Congress.
For Sonia Gandhi he was indispensable, defusing internal revolts such as the current a single by Sachin Pilot in Rajasthan or muting the voices of dissent, as these of the 23 letter-writers. Again, he outfoxed Shah when he managed to get re-elected to the Rajya Sabha regardless of induced defections by a group of celebration MLAs in Gujarat. The Congress Party has lost a crucial leader adept in political management with wide contacts in the bureaucratic and political establishments.