InvestorQ : What is the latest buzz about allowing large companies and business groups into opening a bank?
Sam Eswaran made post

What is the latest buzz about allowing large companies and business groups into opening a bank?

Answer
image
Moii Chavate answered.
6 days ago
Follow

A lot has been spoken and written about allowing corporates into banking. This is especially the corporate groups. The RBI has been averse to this idea due to possible conflict of interest. But that seems to be changing if the latest recommendations of the IWG are taken into account.

This is, perhaps, the biggest shift if it gets accepted and ratified in Parliament as it will require amendments to the Banking Regulations Act of 1949, which governs banks. For long, the RBI had avoided giving banking licenses to corporate houses like the Tatas, Birla, Bajaj, Mahindra etc. The idea was to avoid a patent conflict of interest.

RBI Working Group now feels that the stringent regulations, monitoring levels and the checks & balances are good enough to pre-empt any conflict of interest situations. If this is permitted, it could start with most business groups converting their relatively large financial services franchise into a bank. That could be an interesting and significant move.

3 Views