Sinha, the chairman of the Standing Committee on finance of the last Lok Sabha, said, The policy about banking should be left to the new government. The RBI should not issue licences when the election process is going on... and the Election Commission should stop the move.
Finance minister P. Chidamabaram had, last week, indicated that the RBI is likely to issue a few bank licences notwithstanding the model code of conduct which came into force from March 5.
They (RBI) wish to issue a few licences. So thats the indication we have got. We are not interfering with that process, that is the RBIs decision, Chidambaram had said.
We had expressed our opposition on issuing banking licences to industry houses. New licences should not be issued to them on the basis of the advice from a lameduck government, Sinha told The Indian Express.
The Standing Committee on finance had opposed the proposal on issuing licences to corporate houses. Since nationalisation of the banking sector, the countrys policy has been to keep out industry houses from banking. In 2001, when I was the finance minister the licensing policy was revised by the RBI in consultation with the government... but corporate houses were kept out, he said.
The RBI can frame a policy in consultation with the new government which will take charge after the elections, Sinha said.
Chidamabaram had said the Union Cabinet will meet and continue to take decisions within the limitations imposed by the model code of conduct.
Cabinet will clear proposals based on decisions on policies announced earlier. There is a code of conduct. We will observe that. But nowhere does the Election Commission say government functioning should come to a halt, Chidambaram had said after a quarterly meeting with the public sector banks and financial institutions on March 5.
The Standing Committee had earlier said the fit and proper criteria to be used by the RBI to grant licences was too ambiguous and suggested that a more precise, coherent and objective yardstick or criteria may be formulated to assess the credentials of divergent entities from different sectors in a uniform manner.
As banking being a highly leveraged business involving public money and public welfare, the committee was of the considered opinion that it will be more in the fitness of things to keep industry and banking separate.