Does the RBI know how much conflicts of interest it has created?

Interestingly, the time frame of the RBI financial inclusion committee seems to run almost parallel to that of the banking selection advisory panel. This is a very serious issue. I am not sure that this is good practice in terms of governance and especially, at one of India’s key institutions

‘Oh I get by with a little help from my friends’The Beatles

It has become commonplace to see a new committee announced by the Reserve Bank of India (RBI), every other day. The latest in this trend is the banking license advisory panel that was announced on Friday. As the RBI press release notes,

Dr Rajan announced the names of other members of the committee set up by the Reserve Bank to advise it on new bank licences. These were: Smt. Usha Thorat, former Deputy Governor, Reserve Bank of India, Shri Chandrakant Bhave, former Chairman, Securities and Exchange Board of India (SEBI) and Shri Nachiket M. Mor, Director, Central Board of Directors, RBI. As earlier announced, the Committee would be headed by Dr Bimal Jalan, former Governor Reserve Bank of India.”

As I was reading this, I came across an interesting news item , on The Hindu, dated 27th September 2013, which said that:

“The Parliamentary Standing Committee on Finance ... finalised its report on the new bank licences at its meeting here. According to sources, most of the members opposed giving bank licences to corporate houses and the same concerns have been reflected in the report which will be submitted to Lok Sabha Speaker Meira Kumar soon. ... The members also objected the fit and proper criteria, saying it was discriminatory as it gave RBI discretionary powers to accept or reject an application based on certain undefined parameters.... The members insisted that the guidelines issued in 2001, should be the basis for issuing new bank licences.”

Two questions sprang to my mind. Why has there been a rush by the RBI to form a committee to grant banking licenses when the Parliamentary Standing Committee on Finance (PSCF) is looking at the same subject? Why not wait for the report to be submitted to the Speaker and then have the Parliament debate the same, before deciding on the new bank licenses? Why is there an attempt (RBI’s New Financial Inclusion Committee: Bypassing the Parliament?) to undermine the highest authority of our land, the Parliament?

The above issue notwithstanding, two committees (The New Financial Inclusion Committee and the Banking License Advisory Panel) announced recently by the RBI seem to have confirmed the fears of the PSCF in terms of too much discretionary powers being vested with and used by the RBI.

Readers would recall a recent Moneylife article (RBI’s New Financial Inclusion Committee: Rife with conflicts of interests) highlighted two different levels of conflicts of interests in the newly appointed financial inclusion committee. I had pointed out that while Dr Raghuram Rajan is trying to give out banking licences in a fair and transparent manner, several members of the newly appointed financial inclusion committee are associated with groups looking to get a banking licence. The institutions that some of the committee members are associated with are also focusing on the micro-finance/financial inclusion segment for their commercial interests, creating more potential conflicts of interest

Now, on Friday, October 4th, after the RBI revealed three other members of the Bank License Advisory Panel, these conflicts of interests have become even more serious as evident from the discussion below.

Dr Nachiket Mor, a member of the newly announced banking license selection advisory panel, also happens to be the head of the recently constituted RBI financial inclusion (FI) committee. As chair of this RBI financial inclusion committee, Dr Mor has on-going working relationships with several individual committee members who have direct linkages with institutions (Janalakshmi, Bandhan, J M Financial with Mr Vikram Pandit) that have applied for the banking license. And interestingly, the time frame of the RBI financial inclusion committee seems to run almost parallel to that of the banking selection advisory panel. This is a very serious issue. I am not sure that this is good practice in terms of governance and especially, at one of India’s key institutions.

As they often say, the devil is in the details. Let us therefore look at the members of both of the above RBI committees and examine their inter-relationships:

  • Dr Nachiket Mor - who is a member of the RBI banking license advisory panel and also chair of the RBI financial inclusion committee (both of whose terms are almost concurrent) - additionally, is a member of the central board of the RBI. His listed profile at RBI states that “he worked with ICICI from 1987 to 2007 and was a member of its Board of Directors from 2001 to 2007. From 2007 to 2011, he served as the founding president of ICICI Foundation and during this period was also the Chair of the Governing Council of IFMR Trust and Board Chair of FINO. He is now the Board Chair of CARE India and, among others, is also a member of ...the Boards of IKP Centre for Technologies in Public Health and CRISIL”.
  • Dr Mor is also chair of the allotment committee at CRISIL, which has Ms Rama Bijapurkar, Ms Roopa Kudva and HN Sinor as members. Both Ms Bijapurkar and Ms Kudva, are members of the new RBI financial inclusion committee and will be working closely with Dr Nachiket Mor as part of the committee
  • Apart from CRISIL, Ms Rama Bijapurkar also sits as an independent director on Janalakshmi’s Board, which has applied for a banking license. In addition, she is an independent director at Mahindra and Mahindra Financial Services, whose chairman is Mr Bharat Doshi. And Janalakshmi’s chairman, Mr Ramesh Ramanathan and Mr Bharat Doshi are both members of the new RBI financial inclusion committee and they would also be working closely with Dr Mor in the financial inclusion committee.
  • Mr Ramesh Ramanathan, chairman, Janalakshmi, served as a former independent director and Member of Risk Management Committee, AXIS Bank Limited. One of the group companies, Janalakshmi Social Services is to act as Axis Bank's business correspondent. And as noted above, Janalakshmi has already applied for a banking license
  • And interestingly, Axis Bank’s managing director and CEO Mrs. Shikha Sharma, who previously served as the managing director and CEO at ICICI Prudential Life Insurance Company Ltd, is also a member of the recently appointed RBI financial inclusion committee. It must be remembered that Dr Mor and Mrs Sharma were also long term colleagues at the ICICI group. Incidentally, Axis Bank is also a major partner of Bandhan Financial Services Pvt Ltd and Janalakshmi, both of whom have applied for a banking license.

    Well, there is more to the relationships!
  • Mr Ramesh Ramanathan appears to be non-executive independent director at FINO, which services the financial inclusion and micro-finance sector. FINO, incidentally, was founded by Dr Nachiket Mor, as per his RBI profile.
  • Two more relationships that I found interesting are: a) CRISIL, IFMR Trust and ICICI Foundation are working together to promote projects aimed at development of asset classes that will impact low-income households; and b) one of CRISIL’s Independent Directors (Mr HN  Sinor), who was previously at managing director at ICICI Bank, is also an independent director on the board of one of IFMR Trust’s subsidiaries – IFMR rural channels.  
  • And as all of us know, IFMR trust has significant interests in the Indian micro-finance and sector and it also has direct linkages with institutions like Janalakshmi and Bandhan, which have applied for the banking license. Incidentally, Ms Bindu Ananth, president of IFMR trust, is also has a member of the RBI financial inclusion committee and she will also be closely working with Dr Mor as part of this committee.
  • It must also be mentioned that the IFMR trust (through its subsidiary, IFMR Capital), has worked directly with many MFIs, especially during the growth phase of the Indian micro-finance sector, preceding the 2010 Andhra Pradesh crisis. Please see exhibits 1 and 2 (below) which provide the details.

     And Moneylife readers will also recall what happened at Sahayata Micro-Finance, which was the darling of investors and stakeholders like IFMR capital. Besides, several of the MFIs that IFMR capital has worked with have themselves admitted to the existence of broker agents as can be seen from the e mails given in the linked article. And agents, in my opinion, were a major cause of the 2010 AP crisis.
  • And it would also be interesting to note that Dr Mor’s relationship with IFMR trust still continues. As the State of the Sector Report, 2012, Sage Publications, page 116, notes, The IKP Centre for Technologies in Public Health (ICTPH) and partner Sughavazhvu Health Care are demonstrating an innovative managed healthcare model designed to provide high-quality, cohesive and low-cost health services to rural populations.  SughaVazhvu Health Care Pvt. Ltd. is a wholly owned subsidiary of IKP Trust. ...ICTPH and Sughavazhvu are working with IFMR Rural Finance, the Kshetriya Gramin Financial Services (KGFS) network of small branch-based village banks and insurance partners, to design and market a product that will couple fixed-price, pre-paid primary care and insurance mechanisms to pool risk for secondary and tertiary care (page 116).Independently, the websites of ICTPHSughaVazhvu Health Care Pvt. Ltd and IKP Trust show Dr Nachiket Mor as a director. Additionally, the website of ICAAP also lists Dr Nachiket Mor as a director and says under ‘about us’ that: “IKP Centre for Advancement in Agricultural Practices (ICAAP) is jointly owned by IKP Trust (51%) and IFMR Trust (49%).” One final point – Ms Sucharita Mukherjee is a common director serving on the boards of both IFMR Trust and ICTPH.  

Several critical points emanate from the above.

First, as evident from the above, it is clear that many members[i] of the RBI financial inclusion committee – Dr Nachiket Mor, Ms Bindu Anath, Ms Rama Bijapurkar, Ms Roopa Kudva, Mrs Shika Sharma, Mr Bharat Doshi, Mr Ramesh Ramanathan, and Mr Vikram Pandit – have close inter-linkages amongst themselves, both as individuals and through organisations that they serve as independent directors and/or otherwise represent

Second, some of them (Mr Ramesh Ramanathan, Mr Vikram Pandit, Ms Rama Bijapurkar) represent institutions that have applied for the banking license directly

Third, others (Ms Bindu Anath, Ms Roopa Kudva, Mrs Shika Sharma) represent organisations that are directly involved with institutions that have applied directly for a banking license.  They also work very closely with the financial inclusion and micro-finance sector

Fourth, it is also clear that all of the above members of the financial inclusion committee would be working very closely with Dr Nachiket Mor in his capacity as Chair of the same committee. However, what should not be forgotten is the fact that Dr Mor is also a part of the banking license advisory panel, whose time frame, as noted earlier, more or less, coincides with that of the financial inclusion committee. This, in my opinion, again constitutes a serious conflict of interest.

One another factor exacerbates the conflicts of interests and indeed, it has very significant ramifications for the whole process of governance with regard to new bank licensing. Dr Nachiket Mor is also a member of the central board of RBI which means that he will have an impact in terms of choosing the bank licensees in two places – first at the level of the banking license advisory panel and later, at the level of the RBI central board. Please recall Dr Rajan’s inaugural speech which states the process for determination of banking licenses: 

“We are in the process of constituting an external committee. Dr. Bimal Jalan, an illustrious former governor, has agreed to chair it, and the committee will be composed of individuals with impeccable reputation. This committee will screen licence applicants after an initial compilation of applications by the RBI staff. The external committee will make recommendations to the RBI governor and deputy governors, and we will propose the final slate to the Committee of the RBI Central Board.”

Thus, given the above, I have no hesitation in stating that the banking license selection process has been rendered arbitrary and huge conflicts of interest have entered the fray. Thus, the concerns of the Hon PSCF, are indeed genuine and they must be addressed. All of these need to be seriously looked at by all concerned –Hon Chair, Parliamentary Standing Committee on Finance, Hon Speaker of The Lok Sabha and several other stakeholders including the Hon Prime Minister and Hon Finance Minister!

iI would like to make it absolutely clear that I have greatest regard for many of these professionals including Dr Nachiket Mor. What I am questioning is the process of governance at RBI in giving out banking licenses and as well as in establishing the regulatory framework for financial inclusion in India, which is to have an impact on very large numbers of low income people.


(Ramesh S Arunachalam has over two decades of strong grass-roots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural and urban development and urban poverty alleviation across Asia, Africa, North America and Europe. He has worked with national and state governments and multilateral agencies. His book—Indian Microfinance, The Way Forward—is the first authentic compendium on the history of microfinance in India and its possible future.)



Anil Agashe
9 years ago
Great article
10 years ago
Excellent article. Readers may also be interested in the following article:
"New Bank Licenses, Eligibility Evaluation" available at
Replied to Naavi comment 10 years ago
The link to the referred article is here:
Ramesh S Arunachalam
10 years ago
Please see this associated article
10 years ago
Dr.Manmohan Singh, Mr. Montek Singh Ahluwalia and Dr.Raghuram Rajan are Economic Hit Man (EHM) sent by USA.

They will work for USA and not for India.

It is not correct to have Dr. Raghuram rajan as RBI Governor and to avoid the media attention on his appointment, Indian government staged a mock attack on Indian army, declared as attack by terrorists or Pak.
Ramesh S Arunachalam
10 years ago
Dear All

In response to your request, here is the piece on conflicts of interest and past crisis.
Ramesh S Arunachalam
10 years ago
For many of you who either called me and/or wrote in and requested information on conflicts of interest and financial crises with implications for regulation, I am working on a short (very non-technical) piece that relates conflicts of interest to financial crises globally and outlines implications for regulation and regulatory committees. I start with the market crash of 1929 and pecora hearings of 1933 and traverse through many global crisis situations (very briefly) and finish it with the LIBOR conflicts of interest issue as well as the 2010 AP micro-finance crisis and briefly highlight what role conflicts of interest played in fostering the crisis and the associated regulatory/supervisory failure. Thanks for your kind requests. The same will appear at Moneylife within a couple of days or so. Some of you also requested a perspective on whether or not business houses should be permitted into banking and the same will also be available in a short non-technical piece soon. Thanks for all of your feedback and much appreciated and I will factor all these in as I write further. Thanks again
Ramesh S Arunachalam
10 years ago
You may wonder why I have dwelt so much on the topic of independence (or lack of inter-dependence) amongst members in committees with mandates as large as the financial inclusion committee and the banking selection advisory panel

One of the most critical reasons for the importance attached to the topic of independence in any committee relates to conflicts of interest.

There are several issues here:

(1) Conflicts of interest hinder judgement and affect decision making;

(2) judgement and decision making are what committee members are asked to do; and

(3) Committee members must feel free to think, express, question, and decide in the best interest of those they ultimately represent (the country at large).

And all of these apply very much to committees with mandates as large as the financial inclusion committee and the banking selection advisory panel, both of which are under the aegis of a great institution (with rich traditions) like the RBI.

Let us not forget lessons from Satyam and other companies that had 5 star boards with members being hugely inter-related (and dependent). These failures are too large for all of us to push into the background.

I rest my case!
Laveesh Bhandari
10 years ago
I beg to differ. Just the fact that they all know each other and sit on the same boards, has no bearing on conflict of interest. By your rules we will never be able to put up any committee of experts since good experts are few, they will necessarily know each other.
Ramesh S Arunachalam
Replied to Laveesh Bhandari comment 10 years ago
Thanks and it is not the fact that they know each other that creates a conflict.

Sorry and I would kindly like to set the record straight.

First, Two of the members of the newly appointed RBI financial inclusion committee are Mr Ramesh Ramanathan and Mr Vikaram Pandit and they will be working closely with Dr Mor. Mr Ramanathan represents Janagraha Financial Services Pvt Ltd which has applied for a banking license. Likewise, Mr Pandit has joined up with J M Financial and has applied for a banking license. Now, Dr Mor is board member of RBI and he happens to head the new financial inclusion committee and is also a member of the banking selection advisory committee – both these committees are under the aegis of the RBI and both almost meeting at the same time.

Sorry but I beg to strongly disagree – the above constitutes a serious conflict of interest. I am very sure that this cannot happen anywhere else but India

There are many more conflicts of interest but let me give you a couple of examples. IFMR Trust which is represented (through MS Bindu Ananth) on the new financial inclusion committee will be working with Dr Nachiket Mor (who also seems to have an on-going working relationship with the IFMR trust as has been written in the article through various organisations that he represents), who is on the banking selection advisory panel. And IFMR trust has a relationship with Janagraha which has applied for a banking license. This is one more conflict of interest

Let me give you one more example and wind up my arguments! AXIS Bank has appointed Janagraha Social services as a banking correspondent and it works very closely with Bandhan financial services and both Bandhan and Janagraha have applied for a banking license. And Axis Bank is represented through Mrs Shika Sharma on the new financial inclusion committee and Mrs Sharma will work closely with Dr Mor as part of the financial inclusion committee of which he is a chair and Dr Mor is also part of the banking selection advisory panel, besides being a board member of RBI - which means that he (Dr Mor) will get two shots at recommending (for or against) licensees. This is yet another conflict of interest

There are many many more conflicts but I am tired of stating them over and over again.

I cannot convince those who don’t want to be convinced and sometimes, as Mr Vijay Trimbak Gokhale suggested, it may perhaps be best to let the Hon Supreme or Other Courts decide on whether the above constitute conflicts of interests or not. People like you are slowly pushing me to this view, although, I prefer to avoid the Hon Courts on such matters

Tell me, given a 120 crore odd population, couldn’t we find 12 unrelated and competent people to do the job for the financial inclusion committee (which in opinion, is itself redundant as there is a live committee under Dr K C Chakrabarthy - it has some of the best experts too and it was created just in 2012 and so, there is no rationale for the new Financial inclusion committee). The same goes for the other panel as well!

It is such kinds of conflicts of interests that led to the global sub-prime and it such conflicts that caused the AP 2010 Micro-finance crisis and God alone knows what could happen in the future...

Thanks for your views anyway!
10 years ago
India is a kaleidoscope of conflicting interests. Starting with the Constitution of India that uses words that are stripped of meaning by contradicting itself at every word! No wonder our Courts are what they are. The RBI ceased to be Central Bank and Monetary Authority and lost its purpose at the stroke of a certain midnight hour as did English, History, truth, laws, governance and all the other ugly British inventions that were asked to "Quit India". Has anybody read the Hilton Young Currency Commission's white paper, or the Radcliffe Committee Report? Everything that the RBI was created to set right are now rife and endemic to India.
Ramani Venkatraman
10 years ago
Good article and a bold approach. Though it was appearing to be a chakravyuh reading through the inter-connectivity of individuals involved, the final point made is loud and clear and needs to be commended.We need more such critical analysis of goings-on at such apex institutions.

Ramani Venkatraman
Ramesh S Arunachalam
10 years ago
Dear Colleagues,

Links given in Comments no 10 are reproduced here separately and hopefully, they will work

These are also available in the main article

Ramesh S Arunachalam
10 years ago
Dear Colleagues

The links are not coming in the comments fully. So those of you who are interested in getting the links, please KINDLY write to me at [email protected] and I will be happy to send you the links.

All the links in the previous comment are available in the main article of course and they work. I have print screens of all the web pages as well as downloaded pdf files and so, even if the links change or don’t work, I have the web status as of yesterday!

Interestingly, Prof Sriram (who taught at IIM,A) also alerted me to one another FACT which, if true, will have a significant DIRECT bearing on the conflict of interest issue and also composition of the RBI banking selection advisory panel as well as the RBI financial inclusion committee.

This is the fact that Dr Nachiket Mor and Dr Raghuram Rajan were batch mates at IIM (A), 1987. I was not completely sure of the same, until I received Prof Sriram’s e mail, although I must confess that I had heard of this from several sources

Post Prof Sriram's e mail, I did my own research and I found a Hindu Business Line quote on the same which said that Dr Mor and Dr Rajan, were IIM (A) batch mates from 1987 PGP. I also found from a list from IIM (A), which lists Dr Rajan as 1987 PGP, Ms Roopa Kuduva as 1986 PGP and MS Shika Sharma as 1980 PGP.

Thanks Prof Sriram for alerting me to the fact which seems to be true and given that Prof Sriram taught at IIM (A) for several years, I would be strongly inclined to take his word as CORRECT. However, we still need official confirmation of this fact


Have a nice day all of you!

Business Line Quote -

IIM (A) List -
Ramesh S Arunachalam
10 years ago
Dear Colleagues

Thanks to Prof Sriram from whom I received an e mail and for whom I have the highest regard for, I would like to correct an inadvertent error – Ms Rama Bijapurkar is not a part of the recently constituted RBI financial inclusion committee. My humble and profuse apologies for this small inadvertent error to all concerned and I think, the maze of inter-relationships perhaps confused me.

That said, I had noted the relationship of Ms Bijapurkar correctly in the previous article (, and I quote,

“Besides, the respective websites indicate that Mrs Rama Bijapurkar is a common independent director serving on the boards of CRISIL, Janalakshmi Financial Services Pvt Ltd and Mahindra & Mahindra Financial Services Ltd. Ms Roopa Kudva, Managing Director & CEO, CRISIL is a member of the (financial inclusion) committee, as is Mr Bharat Doshi, CEO of Mahindra and Mahindra Financial Services Ltd.” Mr Ramesh Ramanathan, Chairman Janalakshmi, is also part of the financial inclusion committee

Therefore, while Ms Bijapurkar is not directly on the financial inclusion committee, her conflict of interest CONTINUES because she is a common independent director across three institutions – CRISIL (, Mahindra and Mahindra Financial services Ltd ( and Janalakshmi Financial Services ( – whose representatives are members of the financial inclusion committee of which Dr Mor is the chair (please see Please also remember that Dr Mor is also part of the banking selection advisory panel

A further point must be mentioned here as this adds to the conflict of interest issue. Ms Bijapurkar is part of the allotment committee at CRISIL ( which has the following members:
1. Dr. Nachiket Mor, Chairman
2. Ms. Rama Bijapurkar
3. Ms. Roopa Kudva
4. Mr. H.N. Sinor

10 years ago
First of all how come shri Raghuram Rajan a person of Indian origin with dual citizenship is appointed to this high office. They normally serve the interests of IMF, World bank and also USA.What you see is the unknown hand of USA
V Rajendran
Replied to captainjohann comment 10 years ago
True, Time will tell. I only wish the author Captain Johann is proved wrong. V Rajendran
V Rajendran
10 years ago
The views expressed in the article are bold and unbiased. Justice should not only be done but should also appear to have been done. It is quite reasonable to question the urgency in constituting a committee now with these members. Maybe they will do a good impartial job. But still, are there no one else in RBI and again, what is the urgency now?
V Rajendran
Ramesh S Arunachalam
Replied to V Rajendran comment 10 years ago
Well said sir and you have put it much better than I did.

You are absolutely right when you say that the committee may (or even will, in all probability) do an impartial job but the issue is that some of them have significant familiarity and linkages to the commercial financial world and also to potential bank licensees in the immediate context. The latter is where a significant conflict of interest arises!

In fact, the whole idea is to have diversity in any committee so that counter-balancing forces are available and that is the best possible way to hope to negate conflicts of interest (if they ever arise) and also overcome risk. Diversity will also ensure that there is enough argument and a range of perspectives are considered.
Why have just former regulators or bankers select bank licensees and especially, when some of them could still be (or are) actively involved with the potential licensees or applicants.

Diversity will also encourage out of box thinking. Let us face it, banking is risky business and bank licensing is even riskier – from that perspective, I am sure it may be better to have a diverse group select the licensees.

The expert regulators are already there at RBI – what is the fun in packing the committee with retired RBI people or retired SEBI chairman. One ex regulator should suffice and the rest of the experts are at RBI.

A doctor would have been a refreshing change – some one like Dr Shetty for example (just an example please)! Or an economist with alternative perspective like Reethika Khera or a co-operator like Amritha Patel or a financial journalist like Sucheta or someone like Ramachandra Guha or even a Harsh Bogle (who by way went to IIM Ahmedabad) or a Kiran Mazumdar Shaw

This country has enough eminent people with commitment and skills. The key is to bring them in and get the best out of them!

I hope people take my article in the right spirit and do the needful!

Thanks again for your kind words Sir!
V Rajendran
Replied to Ramesh S Arunachalam comment 10 years ago
Dear Shri Ramesh

You have now elaborated much now. The article with my comments and you additional inputs, gives a very clear picture of your views, which cannot be disputed at all. Best wishes for success in all your endeavours. V Rajendran
Free Helpline
Legal Credit