Issues over Kumar Mangalam Birla's role now at RBI

New Delhi, July 3 (IANS) With a company in the Aditya Birla Group a strong contender for a new banking licence, the presence of its chairman Kumar Mangalam Birla on the board of Reserve Bank of India (RBI), the deciding authority, has raised concerns over the fair and transparent selection process.

But a top official from Adiya Birla Nuvo, the company that has applied for the licence, has dismissed such suggestions. "There is no conflict of interest whatsoever," Rakesh Jain, managing director, told IANS in a one-line email reply.

Corporate law experts also conceded that while there may be no subversion of rules involved in the continuation of Birla on the board of the apex banking institution, the question of possible conflict of interest cannot be ruled out.

"I don't expect there to be any legal issue. But I would expect any director whose group company is an aspirant for a banking licence to at least abstain from participating in any discussion involving such matters," said Diljeet Titus, managing partner and founder of Titus & Co.

"This is the least one would expect to avoid any conflict of interest," Titus told IANS.

As many as 26 companies are in the fray for new banking linceces in the private sector, including some top corporate houses like Tata Sons, L&T, Reliance Group, Bajaj, Shriram and Religare.

The prominent private sector representatives on the Reserve Bank board include Azim Premji, Y.C. Deveshwar and G.M. Rao, besides Birla. But none, other than Birla, are chairman of a company that is seeking a banking licence.

As per the central bank's Web site, the affairs of the apex banking institution and regulatory authority are governed by its board. The board's functions include general superintendence and direction of the bank's affairs.

M. Unnikrishnan, global strategy director of Brand Finance, which advises on corporate brand valuation and image-building, said Birla group's reputation will be enhanced if its chairman steps down voluntarily from the RBI board.

"I don't think this is a question of legality. You have to live to the values of the reputation of the group," he said with a query: "Why do you think India's cricket control board came under a cloud?"

He was alluding to the initial reluctance of the cricket board president N. Srinivasan to step down after a controversy over the alleged improper actions of his son-in-law involving Chennai Super Kings, the Indian Premier League cricket team owned by his company.

"Banks have serious reputation problems the world over. Mr. Birla's action will have a dramatic impact on the reputation of the company, the group and banking sector at large," Unnikrishnan added.

According to Rohit Bansal, chief executive and co-founder of India Strategy Group, Hammurabi & Solomon Consulting, corporate leaders like Birla should exceed expectations and their actions way beyond the defined standards.

"He (Birla) has to go beyond rules. They are the beacon lights of India's corporate world. Under these circumstances, it will be prudent for him to demit office," Bansal said, adding: "Rules are the same for Sachin Tendulkar or any other player. But one would expect Tendulkar to benchmark himself above the rules."

Birla has expressed confidence that his group firm would get new banking licence.

"For the licence, I am very confident about it that we will get it... I don't see any reason why we will not," Birla told reporters in Kolkata last week.

(Gyanendra Kumar Keshri can be reached at gyanendra.k@ians.in)

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