Corporations Shouldn't Expect Banking Licenses

The RBI governor has done well to reiterate the central bank's long-held policy of keeping corporate houses out of banking. It is best to avoid conflicts of interest in this vital sector

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In a world where change is said to be the only constant, it's good to know that some things do not change. The Reserve Bank of India's (RBI) long-held policy of keeping corporates out of banking, for instance.

"There is no proposal to allow corporates, either directly or through non-banking finance companies, to obtain banking licences," said RBI Governor Sanjay Malhotra last week. He cited an "inherent conflict of interest with a group actually dealing with the money of depositors." So there we have it—spelt out in clear terms by none other than the chief of India's bank licensing authority. Hopefully, this enunciation of RBI's position will deliver respite from a notable reality ever since the sector was opened to new entrants: incessant lobbying by corporate houses eager to open banks.