Fingerprints of Modi govt written all over RBI proposal to let corporates enter banking sector: Congress

The Congress on Tuesday came out in support of former RBI governor Raghuram Rajan and former deputy governor Viral Acharya who have severely criticized the Modi government over a proposal to allow corporates’ entry in banking sector.

The duo, who quit their jobs in the RBI due to differences with the Modi government in the past, had released a paper on Monday, calling the proposal a “bombshell.”

An RBI Internal Working Group (IWG) had recently advised amendments in the RBI act and allow corporates to enter the banking sector.

Addressing an online press conference, senior Congress leader P Chidambaram said that the IWG ‘has the fingerprints of the Modi government written all over it’.

Stating that the recommendations put forth by the RBI’s internal group “is part of a deeper game plan to control the banking industry”, Chidambaram warned, “The proposal, if implemented, will completely reverse the enormous gains made in the last 50 years of retrieving the banking sector from the clutches of business houses”.

Outlining three universal principles which govern banking system all over the world, Chidambaram said, “Bank funds belong to the depositors who are the people of this country… If business houses are allowed to own banks, they will, with a small equity investment, control very large amounts of the nation’s financial resources.”

The three principles governing the banking system mentioned by Chidambaram are given below:

• Broad based shareholding reflecting shareholder democracy.
• Strict separation of ownership and management: ownership with shareholders and management in professional hands.
• Prohibition of connected lending; building a wall between lender and borrower.

“All three principles will be thrown out of the window if corporates and business houses are allowed to set up banks,” emphasized the senior Congress leader.

Recalling RBI’s role in the “saga of demonetization” Chidambaram said the central bank worked as a tool then, and it is again being used to “further a dangerous agenda” which will eventually lead to the “accumulation of economic and political power (in the hands of a few people)”.

“This is another example of the Modi government pandering to the aggrandizement and acquisitive ambitions of the business houses of India. If the proposal goes through, it is no secret which politically-connected business houses will get the first licenses and increase their monopolistic power,” said Chidambaram.

Stating that Congress will fight tooth and nail if the government goes ahead with the proposal, Chidambaram appealed to the people of India and all political parties and trade unions “to oppose the retrograde idea of allowing corporates and business houses to enter the banking sector and set up banks.”