Congress heir-apparent Rahul Gandhi is rapidly emerging a headache for the Manmohan Singh Government than even the BJP Prime Ministerial candidate, Narendra Modi.
On a day Gandhi stunned the Government by condemning its Ordinance to protect convicted lawmakers from disqualification as “wrong”, it has emerged that he also lent his weight to a Parliamentary panel’s report asking the Government to reverse another key initiative — the proposal to allow the private sector to run banks.
The Finance Ministry’s ambitious plan to allow the entry of industrial houses into the banking sector, a move which has been supported by both Prime Minister Manmohan Singh and Finance Minister P. Chidambaram, has been strongly opposed by the Parliament’s Standing Committee on Finance.
Rahul Gandhi and six other Congress MPs are part of this 30-member, multi-party Committee.
Neither Gandhi nor the other ruling party members have appended any dissent note to the Committee’s report on the issue, which has asked the Centre to reconsider the proposal to issue new banking licences to the corporate sector.
The panel, which unanimously adopted a report on the issue here on Friday, said it will hamper the nationalisation process, started by Rahul Gandhi’s grandmother, Indira Gandhi.
The report, a copy of which is with Business Line , said that of the five banks promoted by individuals in 1993, only one has survived with muted growth.
The Committee, headed by former Finance Minister Yashwant Sinha, urged the Government to avoid a recurrence of the pre-nationalisation situation, where managements of private banks extended undue favours to their own industry owners.
The panel said in the report that of the 15,630 private sector bank branches, only 2,699 are located in rural areas, constituting just 17 per cent of the total.
Apprehensive on growth
“Given such a background, the committee is apprehensive that industrial/business houses may not be geared to achieve the national objectives of financial inclusion, priority sector lending, etc,” the draft report said.
The committee said of the 12 new banks set up after 1993 and 2001 guidelines by the RBI, one bank has been compulsorily merged with a nationalised bank due to erosion of net worth, two banks have amalgamated with other private sector banks due to poor governance, and only one bank started by an individual has survived, albeit with muted growth.
Criteria questioned
It asked the Government and the RBI to keep industry and banking separate, as banking is a highly leveraged business involving public money and public welfare.
It also questioned the criteria set by the RBI to grant licences. Criteria such as ‘sound credentials and integrity’ are subjective, ambiguous and open-ended.
The Committee said making the minimum capital requirement Rs 1,000 crore would help screen less serious players in the sector.