S&P skeptical of allowing corporate ownership in banks

S&P Global Ratings on Monday expressed scepticism over allowing corporate ownership in banks given India's weak corporate governance amid large corporate defaults over the past few years.

It also said that the Reserve Bank of India (RBI) will face challenges in supervising non-financial sector entities at a time when the health of financial sector is weak.

Last week, a RBI panel had proposed that large corporates may be permitted to promote banks, as well as raising the cap on promoters' stake in private sector banks to 26%, from15% at present.

“We are, however, sceptical of allowing corporate ownership in banks given India's weak corporate governance amid large corporate defaults over the past few years,” S&P said in a statement.

In addition, the RBI will face challenges in supervising nonfinancial sector entities and supervisory resources could be further strained at a time when the health of India's financial sector is weak, it added.