.....“Banking being a highly leveraged business involving public money and public welfare, the Committee are of the considered opinion that it will be more in the fitness of things to keep industry and banking separate. The Committee, therefore, desire the Government/Reserve Bank of India to review the licencing guidelines accordingly,” the report tabled in Parliament said...........
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THe observationshave merit.As many corporatesare already borrowers of the Banking and development Financing Institutions with wide exposure,if they are granted licences for opening banks in India,there would be crash of interest.There are various restrictions under the BR Act,1934 about borrowing by Directors of Banking Institutions from own banks,besides several guidelines/instructions of RBI that have impact on any manipulations by them.What is the guarantee that the Directors and people in the helm of affairs of one new bank would not indulge in reciprocity to accomodate those from other such new and existind Private Sector banks by mutually trassferring credit and other facilities to circumvent RBI control and instructions.I have noted that the FM was too eager and pressurising RBI to expedite issuance of guidelinesfor new banks since long due to his reasons and priorities.I am certaily of the view that RBI should not entertain any applications from entities that already have large exposureto the Banking and Financial System in India.
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