RBI Governor Urjit Patel on Thursday inaugurated the Centre for Law and Economics and as a prelude to the GNLU Conference on Banking and Finance, to be held on Saturday and Sunday, delivered special lecture on Banking Regulatory Powers Should Be Ownership Neutral.
The Governor highlighted some fundamental issues that exist in the regulation of banks, in particular public sector banks. He argued that from the RBI’s standpoint, legislative changes to the Banking Regulation Act that make our banking regulatory powers fully ownership neutral – not piecemeal, but fully – is a minimum requirement.
Suggesting the course of action, the Governor ended his lecture by stating that: “The owner of our public sector banks – the government –which has provided the IBC, the related ordinances and the bank recapitalisation package to get the churn going, might consider making further, equally important contributions by making banking regulatory powers neutral to bank ownership and levelling the playing field between public sector and private sector banks; and by informing itself about what do with the public sector banking system going forward as part of optimising over the best use of scarce national fiscal resources. It is an open issue whether centralised government control alone can be effective enough at designing and implementing governance of banking franchise comprising over 2/3rds of the sector’s deposits and assets. It would be better instead to restore regulatory and market discipline. These, and other structural reforms to the banking sector, would enable India to grow sustainably at respectable rates”.
GNLU will host International Banking and Finance Conference on Saturday and Sunday, which will address global banks, new international regional and multilateral banks, BASEL norms, recognition of non-performing assets (NPAs) in Indian banks, recapitalization of Indian PSU banks, restructuring and consolidation in the banking sector, reforms in the banking system, international opportunities for Indian banks, need for legal reforms in the banking sector, global financial crisis, global financial integration and disintegration, global mergers and acquisitions, cyber threats in international financial system, major international financial centres (IFCs), global competitiveness indices and green financing.
NITI Aayog Vice-Chair Rajiv Kumar, 15th Finance Commission member Shaktikanta Das, Gujarat Government chief secretary JN Singh, IIM-Ahmedabad director Professor Errol D’Souza, Insolvency and Bankruptcy Board of India (IBBI) whole-time member Mukulita Vijaywargiya, among others, will address the conference.
The text of Dr. Patel’s speech can be accessed here.