MUMBAI: Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday ruled out granting banking licences to corporate entities, either directly or through their non-banking financial companies (NBFCs). Citing a potential “inherent conflict of interest,” Malhotra emphasized the risk of allowing business groups to handle public deposits.
“There is no proposal under consideration to permit corporates into banking,” he stated, adding that the separation between banking operations and corporate ownership remains critical to maintaining trust and safeguarding depositor funds.
Interest Rate Outlook: Data-Driven and Flexible
Speaking at a fireside chat hosted by The Financial Express, Malhotra also commented on the RBI’s monetary policy stance, reaffirming its neutrality and flexibility.
“The neutral stance provides us the space to move interest rates in any direction — up, down, or hold — depending on how data evolves,” he said. While inflation has eased to around 2.1%, he noted that policy decisions would remain forward-looking, based on the outlook over the next 6 to 12 months.
“Monetary policy is not guided by just current numbers. Earlier projections pegged Q4 inflation at 4.4%, but with lower-than-expected Q1 data, that estimate may be revised downward,” he explained.
No Review of Promoter Shareholding Cap
Addressing the issue of promoter holdings in private sector banks, Malhotra clarified that there are no plans to revise the current 26% limit on voting rights — a cap enshrined in the Banking Regulation Act. “The RBI favours diversification of ownership to ensure proper checks and balances within institutions,” he said.
However, he pointed out that foreign banks are allowed to hold up to 100% ownership, subject to regulatory approvals and compliance with stipulated norms.
Emphasis on Governance and Board Responsibility
On corporate governance within banks, the governor reiterated that the ultimate responsibility for a bank’s operations lies with its board of directors. “While the board cannot be held responsible for every minor infraction, it must remain vigilant and accountable,” Malhotra said. “It is the board’s duty to protect the interests of depositors — many of whom are small savers — and ensure their funds are handled with utmost responsibility.”
Push for Rupee Internationalisation
Malhotra also outlined the RBI’s efforts to promote the international use of the Indian rupee. He revealed that India is actively working on trade settlement and currency agreements with several countries to facilitate rupee-based transactions.
“We have operational arrangements with the UAE and are in talks with other nations like the Maldives, with whom we’ve signed a memorandum of understanding,” he said. These efforts aim to reduce dependency on major foreign currencies in bilateral trade.
When asked about the proposed BRICS common currency, Malhotra clarified that discussions remain in the early stages. “At this point, there is not much substantive progress on a BRICS currency. It remains more of an aspirational idea than an actionable one,” he said.
The governor’s comments underline the RBI’s cautious approach toward financial liberalisation, with a strong emphasis on stability, regulatory oversight, and safeguarding depositor interests.
