Calcutta, Feb. 10: The amended banking regulation act, which empowers the Reserve Bank to give new banking licences, should be able to handle self-dealing arising out of the entry of corporates.
In corporate self-dealing, members of the bank board, who are also part of the promoter group, look to use funds from the bank for their own business interests. The amended act was passed by Parliament in December.
“The amended banking regulation act is going to empower the RBI to the extent of superceding the board. So, when new banks are coming up, proper checks and balances shall be in place and amendments are good enough to take care of any eventualities that may arise,” said K.R. Kamath, chairman of the Indian Banks’ Association, the apex body representing the banking sector in the country.
He was at the 24th triennial conference of the All India Allahabad Bank Officer’s Association.
The final guidelines on banking licences have been delayed because of differences between the North Block and the central bank over whether industrial houses and real estate firms should be eligible.
Kamath, who is also chairman and managing director of state-owned Punjab National Bank, expects competition to increase following the issue of new licences.
“It’s always good to have competition. Last time, when a new set of banks came up, it was felt as a threat for the public sector banks. But these banks have come back improved and the ultimate beneficiary are the customers,” Kamath said.