Raghuram Rajan against giving banking licence to cos

MUMBAI: Former IMF chief economist Raghuram Rajan is not in favour of the government giving banking licence to corporate houses. "I think the old RBI policy of not allowing corporates banking licence was good one. I still stand by that. Whether it will continue with this or not is a different question," Rajan, who is also an honorary advisor to Prime Minister Manmohan Singh , said on the sidelines of an event in Mumbai.

He suggested that existing peers, like NBFCs and MFIs, should be given preference over corporates owing to their experience in this business. "If corporates are given licence, the regulator needs to ensure there is no inter-company lending, proper risk management processes are followed and there is enough transparency," he said.

Earlier delivering a lecture, he blamed business houses for an inefficient government which is often blamed for the ills in the economy. "... the government is a product of the society that surrounds it. Many of the business people in this room have a special responsibility, because it is you who fund the electoral process. Yet, repeatedly, some of you have put your private interest, I don't care if he is a crook so long as he is my crook, above the public interest," said Rajan who is now professor of finance at the Booth School, University of Chicago, addressing a gathering of senior leaders of industry and the financial sector, at the centenary birth celebrations of founder chairman of HDFC HT Parekh in Mumbai on Friday.

"Indeed, the public doesn't want to vote for, or support, a reformer, for fear that she/he will be ineffective, brave middle class reformers who wanted to make a difference typically lost their deposit in Mumbai in the past Lok Sabha election." Rajan concluded his address themed around, 'The Proper Role of the Government in India', saying that we need to get the government out of businesses the private sector can provide effectively.

Source: EconomicTimes