Date:17/04/2008 URL: http://www.thehindubusinessline.com/2008/04/17/stories/2008041751100801.htm

Back Financial reforms

The Raghuram Rajan Committee recommendations might be enticing, but, in this era of globalisation, liberalisation and privatisation, are fraught with many dangers.

First of all, the laissez faire system recommended in the banking sector will be difficult to implement due to stiff opposition by bank trade unions and the Left parties. India is not a developed nation like the US.

Indian bank depositors do not belong to the wealthier class; bank deposits in India mainly belong to the poor and middle classes.

Who can be the best custodian for poor people’s money other than the Govt. or Govt.-owned Banks or public sector banks with majority government holding?

Before taking the decision to implement the Raghuram Rajan Committee’s recommendations , the authorities should seriously consider what Paul Krugman, Professor of Economics and International Affairs, Princeton University says.

He says we chose to forget what happened in the 1930s.

The Banking Crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.

That lesson was conveniently forgotten. Having refused to learn from history, we are repeating it.

It is high time to re-learn the lessons of the 1930s and get the financial system, including banking sector firmly under control.

Raghunatha Prabhu Alappuzha