The government is likely to extend Reserve Bank of India (RBI) Deputy Governor Anand Sinha’s tenure by two months. Sinha, 62, who was appointed in January 2011, would complete his term on February 28.
If Sinha’s term is extended, it would be an unusual case, as a deputy governor is appointed for a five-year term, or till he/she is 62, whichever is earlier.
RBI had recommended the government to extend Sinha’s term by a year.
Earlier this month, the government had appointed Urjit Patel as RBI deputy governor. Patel, who would look after the monetary policy department, replaces Subir Gokarn.
Sinha, in charge of the department of banking operations and development, among others, is framing the final guidelines on new bank licences. Sinha and his department had played a crucial role in framing the draft guidelines; he was also part of consultations with the government and all stakeholders. The release of the final norms is stuck for about one-and-a-half years (the draft norms were issued in August 2011), as the central bank had sought more powers (such as the power to supersede banks’ boards) before handing out new licences. With the government passing the Banking Laws (Amendment) Bill in December, now, it is expected RBI would issue the final norms soon.
In the final norms, RBI would decide whether to allow industrial and business houses to offer banking services. Many have said allowing the corporate sector to offer such services would lead to conflict of interest. International Monetary Fund (IMF) staff writers have cautioned RBI against giving banking licences to industrial houses. They favoured the draft guidelines that suggest real estate and brokerage businesses be left out of the banking business.
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“International experience has supported the prudent policy position of disallowing industrial houses from promoting and owning banks,” said an IMF report on financial stability assessment.
Recently, Nobel laureate and economist Joseph Stiglitz had advised against giving banking licences to industrial houses. Prime Minister’s Economic Advisory Council Chairman C Rangarajan had suggested while giving new banking licences, the non-corporate sector should be preferred.