Companies in banking? Wrong debate

An internal working group (IWG) of the Reserve Bank of India (RBI) in November merely recommended that large corporate/industrial houses might be permitted to promote banks, only after necessary amendments to the Banking Regulation Act, 1949, to deal with connected lending and exposures between banks and other businesses, and strengthen the supervisory mechanism for large conglomerates. This set the cat among the pigeons. Bankers, academics, economists, and, most importantly, former RBI governor and “public intellectual” Raghuram Rajan all jumped in to deplore the idea. Interestingly, India had already allowed businesses houses to enter banking in its 2013 bank licensing guidelines!

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