No banking license to business houses, RBI Governor Shaktikanta Das said - monitoring will be difficult; also gave the reason

RBI governor Shaktikanta Das said there are no plans to let business houses open banks. The approval will raise the risk of conflict of interest and related party transactions. Running a bank is different from other businesses, he said while speaking at a programme on Friday. Experiences from different parts of the world show it will be very tough to monitor, regulate and prevent related party transactions. The risks are very high. The RBI had declared many big business groups ineligible to license new banks about ten years back. But the same issue was reopened for discussion by an RBI working group in 2020.

Referring to the period before the nationalization of banks in the late 1960s, the governor said, at that time business houses were also involved in banking activities in India. However, now we do not need more banks to fulfill aspirations but we need resources to grow the economy.

Das said India needs strong and well-run banks. We think that with the help of technology, they will be able to mobilize savings and meet loan needs across the country.