New Delhi : Comptroller and Auditor General (CAG) of India Rajiv Mehrishi on Sunday said the root cause of banking sector crisis in India is the problem in bond market as the RBI acts as regulator as well as trader.
Mehrishi said the central bank, in its effort to ensure that banks don’t fail, has slowed down giving licences to new banks. “We have strange bond market where regulator of bond market is also a trader. This is misinterpretation of RBI Act. The root cause of banking sector crisis is the problem in the bond market in India,” the CAG said.
He pointed out that very few new banks have got licence in India in recent years, and that is example of abuse of market dominance by the state.
“(The) RBI, in its effort to ensure that banks don’t fail, has slowed down giving licences to new banks…so it promotes uncompetitive behaviour,” he noted.