The BJP has taken exception to RBI Governor Raghuram Rajan’s announcement in Washington that foreign banks would be allowed to set up shops in India and feared that Government may import global “financial crisis” in doing so.
The Opposition also felt that such crucial issue should have been first discussed domestically. It also demanded that the Government must come clean on this issue and explain the details of such a policy in the national interest.
“What is more pertinent is the fact that the Government and the RBI are not only going to open the Indian market for foreign banks but is even contemplating allowing foreign banks to take over small Indian banks. Such a major announcement should have been first debated here taking into account the global experience,” BJP spokesman Prakash Javadekar said.
The main Opposition warned that banks in the US and Europe have faced financial difficulties and closure and inviting them here may lead to similar repercussions. “Are we importing the financial crisis nowIJ 2008 global financial crisis has raised the question mark about the viability as well the methodology adopted by foreign banks. Governments all over the world had to provide large bailout packages to these banks,” Javadekar said.
The BJP alleged that the contribution of foreign banks to “financial inclusion” is very minimal and below expectations. Moreover, they only compete with Indian banks in the creamy business segment, he claimed.
Javadekar said in 2002, when NDA was in power, a proposal had been floated that private sector companies should be allowed to open banks but it was shot down as there were “moral hazards” and firewalls would not be effective. “If the company goes down then its bank would collapse,” he said.
The party felt this announcement by the Government of allowing foreign banks is also contrary to its stated position on the issue.“All the while, the UPA Government was stating that Indian financial and banking sectors withstood the global financial crisis because major Indian banks are of public sector. Now it wants to suddenly change the course of this sector,” Javadekar said.