When the RBI came out with its long awaited guidelines on the entry of new banks into the banking sector, there was considerable buzz all around. Many of the big corporate houses such as the Tatas, Birlas, Mahindras showed a lot of interest in entering the field of banking. Especially since most of them already had formed separate financial companies to cater to their businesses.
But it was not going to be easy. Globally, banks and financial institutions were the worst hit once the credit crisis in 2008 erupted. But Indian banks emerged relatively unscathed largely on account of the strict norms laid out by the RBI. In an era where increased regulations on banking all over the world seems to be gaining favour, it was imperative for India's central bank to not relax its rules for the entry of new players.
With the bad memories of the global banking crisis still fresh, there was no room for complacency. Hence, the need for stricter regulation. This meant among various other things, it was essential that promoters of the new banks had sound credentials and integrity. Moreover they had to be serious about the banking business from a longer term perspective rather than look for short term opportunities.
When Equitymaster conducted polls on India's Most Trustworthy Corporate Group in the last two years, the Tata Group emerged at the top on successive occasions. That is not all. Readers of the Honest Truth, were asked two questions, (1) Who should get a banking license, and (2) Who I would like to keep my deposit with. For both the questions, the Tata Group edged over the others by a wide margin. So the Tata Group was obviously the most favoured conglomerate depositors would park their money with.
But here is the twist in the tale. The Tata Group yestersday announced its decision to pull out of the race to secure a banking license. The reasons that it cited for this were more or less the same that were pointed out by another entity that had earlier pulled out, Mahindra Group. The Tata Group believes that the regulations and norms outlined by the RBI are too cumbersome. It opines that entering the banking business will impact the successful running of many of its other businesses.
What does this mean? Does the pullout tarnish the reputation of the company? Does it cast a doubt that maybe the Group was not that serious about the banking business? The banking business at the end of the day is about more than just capitalising on profitable opportunities. It is also about protecting the capital of depositors, lending responsibly and aiding economic growth. So if the Tata Group felt that it was not upto the task, it probably makes sense for them to withdraw. And so, all eyes are now on the RBI and the decision that it takes on whom to award licenses among the list of remaining applicants.
Do you think that pulling out of the race to secure a banking license will hurt the reputation of the Tata Group? Let me know your comments
But it was not going to be easy. Globally, banks and financial institutions were the worst hit once the credit crisis in 2008 erupted. But Indian banks emerged relatively unscathed largely on account of the strict norms laid out by the RBI. In an era where increased regulations on banking all over the world seems to be gaining favour, it was imperative for India's central bank to not relax its rules for the entry of new players.
With the bad memories of the global banking crisis still fresh, there was no room for complacency. Hence, the need for stricter regulation. This meant among various other things, it was essential that promoters of the new banks had sound credentials and integrity. Moreover they had to be serious about the banking business from a longer term perspective rather than look for short term opportunities.
When Equitymaster conducted polls on India's Most Trustworthy Corporate Group in the last two years, the Tata Group emerged at the top on successive occasions. That is not all. Readers of the Honest Truth, were asked two questions, (1) Who should get a banking license, and (2) Who I would like to keep my deposit with. For both the questions, the Tata Group edged over the others by a wide margin. So the Tata Group was obviously the most favoured conglomerate depositors would park their money with.
But here is the twist in the tale. The Tata Group yestersday announced its decision to pull out of the race to secure a banking license. The reasons that it cited for this were more or less the same that were pointed out by another entity that had earlier pulled out, Mahindra Group. The Tata Group believes that the regulations and norms outlined by the RBI are too cumbersome. It opines that entering the banking business will impact the successful running of many of its other businesses.
What does this mean? Does the pullout tarnish the reputation of the company? Does it cast a doubt that maybe the Group was not that serious about the banking business? The banking business at the end of the day is about more than just capitalising on profitable opportunities. It is also about protecting the capital of depositors, lending responsibly and aiding economic growth. So if the Tata Group felt that it was not upto the task, it probably makes sense for them to withdraw. And so, all eyes are now on the RBI and the decision that it takes on whom to award licenses among the list of remaining applicants.
Do you think that pulling out of the race to secure a banking license will hurt the reputation of the Tata Group? Let me know your comments
No comments:
Post a Comment