Senior Congress leader P Chidambaram on Tuesday criticised the Reserve Bank of India’s proposal to allow corporate entities into the banking sector, calling it a part of a “deeper game plan” to control the banking industry. Chidambaram also alleged that the Centre was misusing a respected institution like RBI to promote its dangerous agenda.

The former finance minister claimed at an online briefing that the proposal was not RBI’s idea. “The RBI is being misused by the government to propose this idea,” he was quoted as saying by PTI. “The RBI did not propose demonetisation and the government used it to say so, the government is misusing the most venerable institution to push its agenda.”

Chidambaram expressed concern that the proposal will undo the efforts made in the last 50 years to free the banking sector from the control of business houses.

Also read: Raghuram Rajan criticises RBI’s plan to allow corporates in banking sector

Chidambaram also spoke about how the proposal will allow business to control a huge portion of the country’s finances. “The total deposits in the banking industry is of the order of Rs 140 lakh crore,” he said at the briefing. “If business houses are allowed to own banks, they will, with a small equity investment, control very large amounts of the nation’s financial resources.”

Chidambaram and his party colleague Randeep Surjewala said the Congress wanted the government to drop the proposal, adding that they would put up a “formidable opposition to the retrograde proposal”. The Congress leaders urged other political parties, trade unions and people to join them.

Former RBI Governor Raghuram Rajan and former Deputy Governor Viral Acharya had also criticised the proposal on Monday.

In a three-page note posted on Rajan’s LinkedIn, the two former RBI officials raised questions about a recent report released by the bank’s Internal Working Group. In the report released on November 20, the central bank had issued guidelines and eligibility criteria for non-banking entities, including “large corporate/industrial houses” to obtain banking licence.

Rajan and Acharya pointed out that all but one of the experts consulted by the Internal Working Group were against the idea of allowing corporate houses into banking, and that the central bank itself had mentioned this in the appendix to the report.

“Why is there urgency to change the regulation,” they asked. “After all committees are rarely set up out of the blue. Is there some dramatic change in perception that it is responding to?”

Ratings agency S&P Global Ratings also flagged its concerns regarding the plan on Monday, reported Reuters. “The working group’s concerns regarding conflict of interest, concentration of economic power, and financial stability in allowing corporates to own banks are potential risks,” the agency said in a note.

It said that corporate ownership of banks raises the risk of inter-group lending, diversion of funds and reputational exposure, pointing out that non-performing assets within the corporate sector in India remain elevated even though they came down from 18% in March 2018 to 13% in March 2020.