Topic : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
3. RBI has recently recommended giving banking licenses to corporate houses as a part of banking reforms. In this context, critically analyse allowing corporates in Indian banking system. (250 words)
Reference: Economic Times
Why the question:
The article argues against the suggestion of allowing the corporate houses in the banking sector in India. Thus the context of the question.
Key Demand of the question:
One must critically analyse the recent steps taken by RBI in giving banking licenses to corporate houses as a part of banking reforms.
Directive:
Critically analyze – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.
Structure of the answer:
Introduction:
Give a brief background of the question; also explain what role the corporate houses play for the economy.
Body:
An Internal Working Group of the Reserve Bank of India (RBI) has recommended that corporate houses be given bank licenses. Discuss the background of the actions taken by the RBI in this direction.
List down the advantages and disadvantages of such a move. Explain the risks involved in taking such steps.
Explain that India’s banking sector needs reform but corporate houses owning banks hardly qualifies as one. If the record of over-leveraging in the corporate world in recent years is anything to go by, the entry of corporate houses into banking is the road to punishment.
Conclusion:
Conclude with fair and balanced opinion.
