This refers to the editorial “Asking for trouble” (January 9). One main concern of large business conglomerates getting a direct foothold in the banking sector is that the bank will not be their core business. Even with the best of safeguards, it will be a challenge for the government and the Reserve Bank of India (RBI) to keep a watch over infringements. Inter-connected shareholding will perennially stress the regulator. The positive is that the RBI’s draft rules for licensing new banks are stiff. Promoters, entities and groups must have diversified ownership credentials and a track record of at least 10 years. Besides, exposure to speculative sectors like real estate and broking over the past three years is barred. But the bank is likely to be at the promoters’ beck and call — indulging in cross-lending, and without a prudential restraint in their dealings with industrial houses. The onus will be first on auditors, and then on the RBI, to be hawk-eyed about esoteric transactions and hidden non-performing assets. Technology has leapfrogged since the last entry of private banks in 1990, and that would assist far better oversight now. But the need for men of proven integrity and ability in the banking sphere, at higher echelons of management of these new banks, can never be overemphasised.
R Narayanan Ghaziabad
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