Are we importing the financial crisis now? Asks BJP

NEW DELHI: BJP today cautioned that the government may be importing the global "financial crisis" by opening the Indian market to foreign banks and insisted that the RBI Governor should have discussed such a sensitive issue in the country before announcing it on foreign soil.

Referring to the announcement by RBI Governor Raghuram Rajan in Washington that foreign banks would be allowed to set up shop in India, BJP spokesperson Prakash Javadekar said such a major policy change should have been first discussed in the country.

"What is more pertinent is the fact that the government and the RBI are not only going to open the Indian market for foreign banks but is even contemplating allowing foreign banks to take over small Indian banks. Such a major announcement should have been first debated here taking into account the global experience," he said.

Incidentally, BJP has opposed several policy initiatives of the UPA government, including allowing 100 per cent FDI in multi-brand retail and further opening up the insurance sector.

On the foreign banks issue, the main Opposition warned that banks in the US and Europe have faced financial difficulties and closure and inviting them here may lead to similar repercussions.

"Are we importing the financial crisis now? 2008 global financial crisis has raised the question mark about the viability as well the methodology adopted by foreign banks. Governments all over the world had to provide large bailout packages to these banks," Javadekar said.

BJP alleged that the contribution of foreign banks to "financial inclusion" is very minimal and below expectations. Moreover, they only compete with Indian banks in the creamy business segment.
Javadekar said in 2002, when NDA was in power, a proposal had been floated that private sector companies should be allowed to open banks but it was shot down as there were "moral hazards" and firewalls would not be effective.

"If the company goes down then its bank would collapse," he said.

The party felt this announcement by the government of allowing foreign banks is also contrary to its stated position on the issue.