Corporate banks not suitable for Indian Background

Dear Sir,

 

This refers to the article 'Corporate Banks -the idea whose time has come' in Business lIne dated 26/11/20. The very thought for considering Corporates, Corporate Owned NON Banking Financial Companies and other NonBanking Financial companies to have license to run banks by the Internal Working Group of the Reserve bank is ill conceived and  if by any chance accepted for implementation, can only add miseries to the already weak banking system and help weaken further the Financial system exposing the economy to unfathomable danger. As it is, there is a wide gap between the rich and the poor and if the banks are allowed to be owned by corporates, the inequality levels seen in the economy will get widened further giving rise to social unrest, labour problems, and all sorts of ills in the economy taking away the social benefits so far extended to the ordinary masses under various economic reforms implemented as of now. 

 What the economy badly needs now  is a very strong Financial system consisting of very sound and healthy banks with high professionalism, well regulated and supervised non  Banking Financial Companies and Cooperative banks without any scope for having any systemic risk.The accumulation of bad debts and loot of the finacial institutions are by and large man made out of vested interets taking advantage of weak legal system and laxity of governance all around. The solution for this is to professionalise the institutions and bring them under effective and meaningful  regulation and supervision under a highly independent regulator accountable to parliament. There is also a paramount need to widen and deepen the capital market,  particularly bond market,forex market,and commodities market. There is also an urgent need to review the various products in vogue in different institutions and  markets and introduce lots of dynamism to regulate and supervise the market in such a way that confidence in the institutions and their efficient running with accountability for lapses if any, is fully restored and strengthened further There is definitely no exigency at present  to hand over the banks to corporates at this juncture.

 There is absolutely no harm in taking the views of experts irrespective of their background, based on merits and national interest.  After all, economic development is in the interests of all people without any reservations.        

 

Yours faithfully,

Dr.T.V.Gopalakrishnan

(This letter appeared in BusinessLine dated 27/11/20 with some editing).