Corporate houses should not be offered license to start banks in India, feels former chief economist of IMF, Mr. Raghuram Rajan.

"I think the old RBI policy of not allowing corporates banking licence was good one. I still stand by that. Whether it will continue with this or not is a different question," Rajan said.

He is also the honorary advisor to Prime Minister Manmohan Singh.

According to him, non banking finance companies (NBFCs) and micro finance institutions (MFIs) should get priority over companies while licenses are being given out by regulator, Reserve Bank of India.

"If corporates are given licence, the regulator needs to ensure there is no inter-company lending, proper risk management processes are followed and there is enough transparency," he said.

He had earlier also said that these business houses were responsible for the inefficient functioning of the government and the delinquencies faced by the it.