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The Tata group is now so only in name; its real head is Cyrus Mistry. But it is Indiaís largest and most spread-out group. Hence its decision to withdraw its application for a bank licence is something to ponder over. It chose not to give an explanation for its change of mind, so one can only guess what led it to forgo one of the last great business opportunities still under the control of the government. Surely it would have set up a bank ages ago had it not been for the fact that the government held the reins and took care to minimize competition to its own daughters, the nationalized banks. Its decision to take its hat out of the ring may have something to do with the snail-paced and convoluted process of selection that the Reserve Bank of India has followed. It made it abundantly clear, without saying so in so many words, that introducing new private competition was deeply repugnant to it.

First, the RBI sat on the issue as long as it could, ignoring all the prodding from the government. When it could no longer sit on its hands, it used the governmentís favourite ploy when it wants to avoid a decision: it published a discussion paper, and gave plenty of time for people to comment on it, and for itself to ponder the reactions. Then, ever so slowly, it finally invited applications; but it set such absurdly restrictive conditions that it got only a handful of applications, most of them from big business houses. That put the RBI in a quandary, for its worst nightmare is that some businessman would set up a bank, receive deposits, and divert them to his own business: the bigger the business, the bigger could such diversion be. So now it has invented a further dilatory tactic: it has appointed another committee to look at the applications, and to make things as difficult as possible, it has chosen a chairman who in his tenure as governor of the RBI resisted all thought of licensing new private banks.

The Tatasí decision to retire may have something to do with the vibes emanating from the committee; or it may owe itself to the restrictions the RBI has placed on the ownership of equity. They are essentially designed to ensure that the new banks would belong to the applicants only in name: the shareholdings would be so fractured that the licensees would have little voice in management. That is understandable in view of the RBIís lack of fondness for businessmen. But its conditions are so dire that the new banks may have no one to run them: that they may become the playthings of middle managers, and could well generate enormous scandals. That is something that the Tatas could do well without. Others, too, should think twice about their applications.