New Delhi: RBI Governor Shaktikanta Das said, there is no plan to allow business houses to open banks. Giving permission will increase the risk associated with conflict of interest and related party transactions. Das said at an event on Friday, running a bank is different from other businesses. Experiences around the world show that it will be very difficult to monitor or regulate and stop related party transactions. The risks involved are very high.
The RBI had declared several large business groups ineligible to grant licenses for new banks a decade ago. However, an RBI working group started discussing the issue afresh in 2020. Referring to the period before the nationalization of banks in the late 1960s, the governor said, at that time business houses were also involved in banking activities in India. However, now we do not need more banks to fulfill aspirations but resources to grow the economy. Das said, India needs strong and well-run banks. We believe that with the help of technology, they will be able to mobilize savings and meet loan needs across the country.
Das said, the growth rate is good in the current environment. Monetary policy should clearly focus on controlling inflation. Amid the debate on neutral rates, he said, theoretical and abstract concepts are based on a person's decision. These cannot determine policy in the real world. On the impact on growth due to higher interest rates, the governor said, growth has been strong despite the current policy rate. We will achieve the target of 7.2 percent growth rate in 2024-25. The central bank is particularly paying attention to the inflation front of food items. Wholesale Price Index based inflation is also being monitored.
Das said that during his six-year tenure, the relationship between the government and the RBI has been good. Due to this, the economy has improved rapidly after Covid-19. On the allegations made in the book written by his predecessor, he said, no one expects the RBI to become a 'cheerleader'. I have no such experience. Das's tenure ends in December this year.
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