People's Democracy

 AIRBEA Criticises Chidambaram Stand

 THE All India Reserve Bank Employees Association (AIRBEA) noted with deep concern the opposition from Foreign Institutional Investors (FIIs), other agencies and a section of the press to the recent RBI directive for restricting maximum holding in private banks by promoters and other entities – indigenous as well as overseas – to 10 per cent of total equity. 

In a statement issued in Kolkata on September 13, the AIRBEA pointed out how these sections are already very bitter about RBI’s disapproval of one such agency viz. the USA based New Bridge Capital taking over the Global Trust Bank. A hue and cry has been raised that the RBI directive will discourage foreign direct investment (FDI) in India. The AIRBEA cautioned against such unjustified criticism.

In this connection, the AIRBEA also noted with deep apprehension the statement made by the union finance minister P Chidambaram in a review meeting with the bank chiefs at New Delhi on September 9, 2004 that the final decision on ownership pattern of the banks will be taken by the government and not by the RBI. The AIRBEA felt that the statement of the finance minister is “ill-conceived, will send a wrong message all around and encourage those who are out to undermine efforts for eradicating the maladies which have been affecting the private banks for many years.” It further stated that “the finance minister’s fulminations call into question the authority of RBI as the regulator of the banking and financial sector of the country which is unfortunate and does not augur well for the country’s banking system. The government is clearly backtracking under the pressure of the global capital.”

Looking to the goings-on in the private banking sector in the country for quite some time, AIRBEA strongly felt that the RBI directive is a step in the right direction, though belated, as diversified ownership of a private bank is a necessity for safeguarding the interest of the depositors and public.  The measure will also take care of the manipulation of the FIIs and other agencies to gain control of banks through unethical stock market operations. Besides, restriction on shareholdings will enable a private bank to remain free from undue pressure which is very much likely in case a single party owns a substantial portion of its equity, stated the AIRBEA.

(INN)