Home/ Industry / Banking/  Jury is still out on allowing large corporates to set up banks: RBI Dy Guv

Technological and digital innovations have improved the efficiency, productivity in delivering the financial services but have also presented a newer set of challenges for all stakeholders, said Reserve Bank of India (RBI) deputy governor M Rajeshwar Rao at 14th mint Annual Banking Conclave.

In the times of Data security, privacy, mis-selling, and various other cyber challenges, Rajeshwar Rao said regulated entities need to be on their toes to oversee tech-driven disruptions.

The RBI deputy governor during his address has also raised the issue of allowing large industrial houses setting up private banks and flagged some concerns around the same and why it is not yet fully conclusive enough to allow corporates to set up banks.

The RBI has recently said it was still examining if corporates should be allowed to run banks while accepting recommendations by an internal working group (IWG), but accepted its suggestion to increase the cap on promoters’ stake in banks to 26% from the current 15%.

The RBI deputy governor has raised concerns about granting bank licenses to large industrial houses which include conflicts of interest through self dealing at the expense of banks.

The other risks include connected lending and complex web of group structures and regarding the separation of banking and large industrial group companies, the central bank deputy governor said.

"Keeping industry and banking separate will avoid spillover risks where trouble anywhere maybe transferring risk to the depositors and there will be subsequent consequences."

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 15 Dec 2021, 07:25 PM IST
Recommended For You
Get alerts on WhatsApp
Set Preferences My Reads Watchlist Feedback Redeem a Gift Card Logout