RBI will need more time to allow corporates in banking sector, says KV Kamath

KV Kamath

The Reserve Bank of India will need more time to allow corporates in the banking sector, Jio Financial Services Chairman KV Kamath has said.

“A regulator's primary purpose from the banking front, is the safety of employees. When the regulator feels that there is comfort in fintech coming in by becoming a bank, and taking a bonus, for which finally the bank or regulator is going to be responsible, at that point of time, they will allow this to happen,” Kamath said during the Lalit Doshi Memorial Lecture in Mumbai. “I am seeing signs of rash behaviour, I am being very frank about it, on the part of digitally driven enterprises, which, I think. the regulator will have to manage with great care.”

State-owned banks need not be privatised if they have a return on equity (RoE) of 15-20 percent but should be given more operational freedom, Kamath said, reiterating what he told Moneycontrol a month ago.

In early November, Kamath told Moneycontrol if public sector banks (PSBs) are self-sufficient when it comes to capital and can match their private peers on technological capabilities, the need for divesting them can be revisited.

Early in the year, finance minister Nirmala Sitharaman said privatisation of public sector undertakings is very much on the table and the government is committed to it as these are cabinet decisions though the timing will be decided at a later stage.

Kamath also said the rupee would be stronger in the next 25 years. The comments came when the Indian currency has hit a record low and the central bank is trying to defend it by intervening in the forwards as well as the spot market.

The rupee, which has remained volatile throughout the year, has depreciated 1.4 percent, so far, in 2024 and experts see it dropping to 85 against the greenback in the coming weeks.

Multiple factors such as outflows of foreign investors from equities, strong dollar and weak growth data have triggered the slide.

The appointment of the new RBI governor also played a role, as analysts and market now see and increased chances of a rate cut in the next policy, due in February.

In a surprise move, the government named revenue secretary Sanjay Malhotra as the RBI governor, though most have expected Shaktikanta Das’ tenure to be extended by at least a year. Malhotra started his three-year term on December 11.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.