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Banking license to indl houses would endanger people's money: AIBEA

All these suggestions and recommendations are most retrograde and unwarranted in Indian conditions, AIBEA said

Tuesday November 24, 2020 11:04 PM, ummid.com with inputs from IANS

New Bank License

Chennai: The All India Bank Employees' Association (AIBEA) on Tuesday opposed the recommendations made by the Reserve Bank of India's (RBI) Internal Working Group as they are "retrograde" and would endanger people's money.

Indian banking sector's largest union expressed its reservation a day after warnings issued by former RBI Governor Raghuram Rajan and Macquarie Research over grant of licenses to industrial houses.

The RBI's internal working group recently recommended that large corporate/industrial houses may be allowed as promoters of banks, promoters' stake in the bank's equity share capital can be increased from 15 to 26 per cent, and large non-banking finance companies owned by the corporate houses can be converted as full-fledged banks, among others.

"All these suggestions and recommendations are most retrograde and unwarranted in Indian conditions. Our Banks represent Rs 135 lakh crore of people's money," AIBEA General Secretary C.H. Venkatachalam said in a statement.

According to him, RBI is supposed to be the repository of the people's faith in the banking system but unfortunately, it in itself is suggesting measures that will endanger the safety of people's money in the banks.

"We strongly denounce the provocative recommendations of the RBI Working Group and urge upon the Government to reject these proposals," Venkatachalam said.

On Monday, Macquarie Research also expressed its surprise, especially its timing coming amidst a spate of bank failures.

"At a time when bank failures are increasing in India, the decision to distribute licenses could be controversial, in our view. We expect RBI to exercise caution in this regard and hence some recommendations may not come to fruition", Macquarie said in a report.

On similar lines former RBI Governor Raghuram Rajan and Deputy Governor Viral Acharya in a blog post termed the recommendation as a "bombshell", and said that although several recommendations of the report are worth adopting the one to allow corporate houses into banking should not be taken up.

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