Corporate-run banks can serve economy better: Subbarao

Mumbai: Defending the decision to allow corporates to enter the banking fray, outgoing Governor D Subbarao today said as a knowledge institution, the Reserve Bank needs to change with times, and asserted that corporates will serve the economy better by entering the field.

“We believe that world has changed, India has changed and banking has changed,” Subbarao said, explaining the rationale to allow corporates into banking, while delivering the 10th Nani Palkhivala memorial lecture here late this evening.

[caption id=“attachment_1070953” align=“alignleft” width=“380”]  Subbarao, RBI’s departing governor said hat corporate run banks sere the economy better. AFP. [/caption]

He acknowledged that in the last two instances of granting licenses – in 1992 and 2001 – the Reserve Bank did not feel the need to allow corporate houses in.

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“Of course, there are pros and cons of that (granting bank licences to corporates), but after weighing on the pros and cons, we determined that the economy will be better served if corporates are made eligible for bank licences,” he said in his last public address before he demits office on September 4.

The RBI is at present sifting through 26 applications for banking licences. The applicants include the Tatas, Anil Ambani-led Reliance Capital and Aditya Birla group.

Interestingly, Subbarao’s appointed successor, Raghuram Govind Rajan, has in the past spoken against allowing corporates into the fray due to potential conflict of interests.

PTI