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The Parliamentary Standing Committee on Finance almost in one voice want the Reserve Bank of India to drop the move to issue new banking licences.
Questioning what they called the “subjective nature” of the RBI’s final guidelines, many members reportedly told the RBI Governor that the guidelines could open an avenue for corruption.
Sources in the panel told Business Line , on conditions of anonymity, that the members feared the guidelines would result in corruption and urged the RBI to drop the move.
Though some MPs supported the RBI’s plan, they argued that the final guidelines will not encourage any one to start a bank.
RBI Governor D. Subbarao briefed the panel on the final guidelines to allow corporate houses and public sector entities with “sound credentials and a minimum track record of 10 years” to start banks.
Subbarao told the members that the RBI has, so far, not received any application. According to the guidelines, released on February 22, the last date for submitting applications is July 1. He said applications were expected before the deadline. The Governor also told the MPs that auctioning of bank licences may not be possible as the sector works on certain principles and guidelines. He also explained to the members that strict measures have been taken to verify the applications so that only eligible applicants are allowed to start banks. Members of the panel, including its Chairman and BJP leader Yashwant Sinha, however, expressed concern at the move. Sinha is learnt to have told the Governor that the global situation demands more caution from the RBI to issue new banking licences. He said even countries such as the US have not allowed corporate players to enter the banking sector.
Financial security
Referring to a recent sting operation by a Web site, some members apparently alleged that a few private banks in the country are involved in money laundering. They urged the RBI to ensure that allowing more private players in the country does not lead to generation of for more black money and thus jeopardise the country’s financial security. Left MPs argued that the process is quite opposite to the nationalisation of banks started in 1969.
An MP said Subbarao openly shared the RBI’s point of view on the issue. “It was a good interaction. I felt that even the RBI is not confident about the implementation of the guidelines. The RBI looks confused. The credibility of this Government has hit a new low. So no one may even apply for a licence,” an Opposition MP said.
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