Bank licence: KM Birla quits RBI board

Move follows controversy over conflict of interest

Kumar Mangalam Birla, chairman of the Aditya Birla Group, has resigned from the Reserve Bank of India (RBI)’s central board of directors. He was appointed to the central bank’s board in June 2006.  

The resignation comes weeks after his group firm, Aditya Birla Nuvo, applied for a banking licence, sparking a controversy over conflict of interest. Though the Aditya Birla Group had maintained it saw no conflict of interest, the Communist Party of India had said it would raise the issue in Parliament.

RBI’s website removed Birla’s name from its site on Tuesday. RBI Governor D Subbarao had recently said the apex bank would look into the issue and “consult” the government on Birla’s continuation on the board.

The other prominent private sector representatives on the RBI board include Azim Premji,

Y C Deveshwar and G M Rao. But none, other than Birla, were chairmen of companies seeking a banking licence.

According to the central bank’s website, the affairs of the apex banking institution and regulatory authority are governed by its board. The board’s functions include general superintendence and direction of the bank’s affairs.

When contacted on Tuesday, the Aditya Birla Group did not comment on the issue.

The central bank has received applications from 26 entities, including Aditya Birla Nuvo, the Tatas, and Anil Ambani for banking permits.

The central board meets at least once every quarter. Apart from holding meetings in Mumbai, Chennai, Kolkata and one in New Delhi after the Union Budget, which is addressed by the finance minister, the rest of the meetings are held in other state capitals by rotation. The main function of the Central Board of Directors of the Reserve Bank is to provide overall direction to its affairs.