At a time when Reserve Bank of India (RBI) is planning to give banking licenses for new players, some experts caution against allowing corporates to set up banking business.
Highliting the risk of conflict of interests, Nobel laureate Joseph Stiglitz said corporates should not be allowed to enter banking space.
He said the risks from potential conflict of interest would outweigh benefits from the economies of scale that banking licenses bring for corporates.
Stiglitz said this after delivering the CD Deshmukh Memorial Lecture organised by the Reserve Bank of India.
Meanwhile, he appreciated the RBI for insulating the country from the financial crisis in the western world. Emphasising on right regulatory approach, Stiglitz said the need of the hour is not over-regulation but right regulation.
He also appreciated the calibrated approach taken by the country with regard to opening up its capital account, saying that ‘it’s not an option to eliminate the controls fully for a country like India’.
The Parliament has recently passed amendments to banking laws, which pave the way for the entry of new players into the arena.
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