Letting corporates enter banking will risk system: Sinha

Mumbai: Supporting multi-lateral agency IMF's view on commercial banking licence policy, Chairman of the Parliamentary Standing Committee on Finance and senior BJP leader Yashwant Sinha on Thursday said letting large corporates into banking space will "unnecessary risk" stability of the sector.

"I entirely agree with IMF. It's a very bad idea to give banking licences to corporates. This was something where clear separation had been done decades ago for good reasons."

"Any relaxation in these norms is going to create not only conflict of interests but also unnecessary risks to the financial sector," the former finance minister told reporters on the sidelines of a reinsurance event organised by the industry lobby IMC here on Thursday evening.

Wednesday, the IMF had said: "In the current context, the risks may outweigh the benefits…the legal, operational, and regulatory framework for consolidated supervision of both bank led groups and financial conglomerates is still missing some important elements…"

On the government's decision to give a free hand to the oil companies to revise diesel prices, Sinha said neither diesel nor petrol prices are fully deregulated as most oil marketing companies are owned by government.

He suggested that oil companies be allowed to revise prices upwards/downwards every fortnight as used to be the case during the NDA regime.

On the direct tax code, Sinha said the government should look into the House panel report. "We had submitted our recommendations to the government on March 9, 2012 on the direct tax code, which also contains the GAAR chapter… I personally feel GAAR should be included in the DTC Bill."

On the upcoming Budget, Sinha said it should not be populist like the one in 2008-09 as the government didn't have the fiscal space to do so.

Sinha also raised concerns regarding the fact that around 50 per cent of the people who had availed of the benefit of farm loan waiver are not the intended beneficiaries. The government had implemented the programme without proper regulation, he claimed.