Is the Entry of Corporate Houses in Banking Sector a Real Worry?
Former RBI governor Raghuram Rajan and deputy governor Viral Acharya have jointly penned an article where they have criticized Narendra Modi government’s move of allowing big corporate houses to enter in the Indian banking sector. They said , Allowing Indian corporate houses into banking will lead to the concentration of economic and political power in these business houses and the exchequer could be faced with significantly higher bailout costs if these banks were to fail. And, The history of such connected lending is invariably disastrous — how can the bank make good loans when it is owned by the borrower? Even an independent committed regulator, with all the information in the world, finds it difficult to be in every nook and corner of the financial system to stop poor lending. Information on loan performance is rarely timely or accurate. Yes Bank managed to conceal its weak exposures for considerable periods. In this article I am going to rebut both Rajan and A...