Congress stoutly opposes proposal to corporate entry in banking sector

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Will increase Adani Ambanis’ monopolistic power as they with a small equity investment, control very large amounts of the depositors’ 1.40 lalkh crore money

By Abdul Bari Masoud

New Delhi:  The Main Opposition Congress on Tuesday announced that it will stoutly oppose the proposal of the BJP government to allow corporates and business houses to enter the banking sector and establish banks.  Welcoming the statement of Dr Raghuram Rajan and Dr Viral Acharya, the party said it would chalk out a common strategy to mobilize the public opinion on this dangerous proposal. The party also asserted that the RBI’s this proposal has the fingerprints of the Modi government written all over it.

The party came out in support of former RBI governor Rajan and former deputy governor 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 allowed corporates to enter the banking sector.

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

He warned the recommendations put forth by the RBI’s internal group “is part of a deeper game plan to control the banking industry.  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, he 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 former minister.

Bank funds belong to the depositors who are the people of this country. As a proportion of total deposits, the equity of a bank is minuscule. The total deposits in the banking industry is of the order of Rs 140 lakh crore.

Without taking the names of Ambanis, and Adani, the former Finance minister said if corporate houses were allowed to own banks, they will, with a small equity investment, control very large amounts of the nation’s financial resources.

This must not happen and the Congress will strive its utmost to ensure that this will not happen, he warned.

It is on record that the idea, when first mooted, was opposed by all but one expert who were consulted. Dr Rajan and Dr Acharya have given cogent and convincing reasons why the idea is totally retrograde and why it will lead to concentration of economic and political power.

It is shocking that such an idea should have been presented to the people as though it has the imprimatur of experts and the endorsement of the RBI, he said.

Recalling RBI’s role in the “saga of demonetization” he said the central bank worked as a cat’s paw of the government 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 and added that “like the demonetization, I am sure no minister of the Modi government will be aware of this development”.

He also pointed out that there are some other proposals of the IWG that are controversial and highly debatable which require a separate analysis and exposition.

In response to this correspondent this question, Chidambaram said “we will devise a common strategy with all like-minded parties, trade unions and all stakeholders.”

He further said Congress condemns the proposal and demands that the government, unequivocally and forthwith, declare that it has no intention of pursuing the proposal.

He announced that if the government goes ahead with the proposal, Congress will fight tooth and nail. He also appealed to  people 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.”

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