Proposed corporate ownership of Indian banks poses high risks, says S&P

Pointing to the upside from proposed norms, the agency said recommendation to harmonise licensing guidelines for all banks, new and old, will help restore a level playing field for all players

S&P Global Ratings on Monday said it was sceptical of allowing corporate ownership in banks, given India’s weak corporate governance record amid large corporate defaults over the past few years.
 
The Reserve Bank of India’s (RBI) internal working group on Friday recommended allowing large companies to set up banks and awarding banking licences to well-managed non-banking financial companies (NBFCs).
 
“In our view, the working group's concerns regarding conflict of interest, concentration of economic power, and financial stability in allowing corporates to own banks are potential risks. Corporate ownership of banks raises the risk of intergroup lending, diversion of