India will never allow large corporates to open a bank and it will all be professional banking,  veteran banker Narayanan Vaghul said. 

The pre-bank nationalisation experience has provided a learning and the mistakes of allowing large corporations into banking in India will never get repeated, Vaghul, who formerly headed ICICI, said.

Despite a slew of corporates applying for a banking licence in the last round, the Reserve Bank of India (RBI) has not given clearance to any.

After floating a discussion paper two years back, the case for allowing large corporations because of their ability to get capital attracted criticism from many quarters, including former RBI top brass, and the issue did not move forward.

Speaking to reporters, Vaghul said the capital needed for economic growth would come from the public, which is keen to invest in a professionally-run lender.

Industrial houses "cannot be banking", Vaghul said, recalling the past experiences with them and how state ownership of banks became popular.

"There used to be a talk about, even in professional banking circles, that things are not alright in the banks which are owned by the industrial houses.

"I don't think this country will have a repetition of that. It will be all professional banking," he told reporters on the sidelines of the launch of "Reflections", his memoirs, last Friday.

According to Vaghul, banking in the next decade will be all digital and there is a chance that legacy banks can be unbundled.

The 87-year-old hoped that the government will move ahead on its stated goal of privatising state-run banks made in a budget two years ago.

Privatisation can help professionalise boards and get better selections of the chief executives, he said, pointing out that this helps the credibility of banks and once that is established, accessing funds from the public becomes easier.

Going forward, the private sector banks' play in the financial sector will grow so fast that automatically the heft of public sector banks will keep moving down.

There is a need for all the banks, including the regional rural banks as well, to adopt technology much faster, he said.

"The future is going to be very different. Speed with which everything is changing... banking in ten years’ time will be all digital," he said, adding that this period can also see legacy banks get unbundled as well.

"It will be all fintech-oriented where loans will be granted online, with very few customer contacts," he added.

A few years ago, consolidation was said to be the panacea for the issues in banking, Vaghul said, adding that consolidation is not an answer anymore.