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In Focus

August, 8

Is BJP’s Banking Regulation (Amendment) Bill, 2017 designed to do the bidding of Industrialists bankrolling PM Modi?



To lend or not to lend is a business decision best made by banks. This decision is optimally made when the lenders are deemed fully responsible for absorbing the losses and deemed fully deserving to enjoy the returns on their investment. Every loan is a calculated risk that must be assessed on a case by case basis. It cannot made in a top-down manner, like the BJP would have us believe. Nor should the banks be encouraged to fail with the promise of bailouts at the cost of the taxpayer.

BJP’s Banking Regulation Amendment Bill, 2017 seeks to allow the central government to direct the Reserve Bank of India to interfere in individual lending decisions made by banks. This interference would be both in cases where businesses have to space out their loan repayments or default on them entirely. This would prevent the RBI from discharging its duties as an unbiased issuer of guidelines to the financial system as a whole. The RBI’s guidelines are meant to be ‘in the public interest’ and ‘in the interest of banking policy.’ The RBI is not meant to micromanage whether a company should be able to space out its loan repayments or to decide whether its assets should be auctioned to help the banks recover their money. To ensure that justice truly is blind, it is important that the authority making the rules is different from the authority enforcing them. That this consideration seems to have escaped Finance Minister Arun Jaitley’s keen attention to legal detail, renders the government’s intent suspect.

There is a real danger that the party at the Centre would cherry pick cases to intervene in based on whether the businesses are headed by those who contribute to the party’s coffers or not. Furthermore, given Mr. Modi is widely reported to be extremely close to two industrial giants, what stops their interests from being factored into all-important decisions as to whether their potential competitors should be allowed to restructure loan repayments or have their assets sold to recover the loan? The government should not be in the business of doing business, and neither should the RBI.

The Indian National Congress therefore appeals to the elders of the Rajya Sabha to oppose The Banking Regulation (Amendment) Bill, 2017 today.

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