The Reserve Bank of India's (RBI) decision to give "in principle" approval to 11 applicants for payments banks is arbitrary and Governor Raghuram Rajan must be prosecuted, said BJP leader Subramanian Swamy.
In a statement issued on Saturday, Swamy said: "The RBI recently announced that it has given 'in principle' approval to 11 applicants for payments banks licenses. This arbitrary and malaise decision appears to be a big scam for which Governor Raghuram Rajan must be prosecuted."
He contended that the manner in which 11 applicants were short-listed was inconsistent with the rule of law.
"It is not clear how the RBI came to the number of 11 payments banks, or why licenses were denied to the others," he said.
Swamy wondered why RBI chose to use the Banking Regulation Act, 1949 to license payments banks when parliament has made a separate law for governing payment systems under the Payments and Settlement Systems Act, 2007.
"Since paragraph IV of the payment bank guidelines do not allow such entities to undertake any lending activities, it is not even clear why RBI is classifying them as banks," he said.
According to him, the criteria for evaluation by the RBI's external committee like financial soundness, fit and proper criteria, physical outreach, business model innovation and others are vague and empty.
"There is no explanation on how the committee evaluated each criterion mentioned in the paragraph. Were marks given for each criteria? Was there a pre-decided cut off marks below which licenses would be denied? What was the basis/system of providing marks or comparative ranking? How was innovation adjudged and comparatively scored/ranked between the 41 applicants?" he asked.
He claimed that there is no review or appeal provision for rejected applications which is also violation of the rule of law.
"There would be no problem if there were 30 payment banks instead of 11. It would have promoted more competition and reduced costs to consumers," he said.