Former RBI deputy governor SS Tarapore today said the move to transfer the ownership of State Bank of India (SBI) from the Reserve Bank of India (RBI) to the government was disastrous. | |
| He felt Parliament should block the transaction. |
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| "An alert Parliament should block the clauses in the SBI Amendment Bill relating to transfer of ownership of the SBI from the RBI to the government. The transfer would be a major setback to the credibility of the financial sector reform process started 15 years back," Tarapore, chairman of the Committee on Fuller Capital Account Convertability (FCAC), said at a Ficci seminar. |
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| The committee, in its report submitted to the government a few months ago, had urged it to put the transfer on hold. |
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| Tarapore said though the second Narasimhan Committee had recommended in 1998 that a regulator like the RBI should not be the owner of a bank, which had been misinterpreted by the government. |
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| "It does not mean that a regulator like the RBI should transfer ownership to a bigger regulator that is the government," he added. |
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| The government already owns 50 per cent of the banking sector and transfer of SBI, which constitutes 25 per cent of the public sector, would only add to its problems, he said. |
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| "The RBI at least did not face the Budget constraints that the government does," he added. |
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| Tarapore also said that India would become less competitive and not attain optimum efficiency if it did not move towards FCAC. |
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| Strengthening the banking sector was crucial for this purpose. While the government had not agreed to resolve the majority ownership issue, it was, at the same time, not in a position to meet the capital requirements of nationalised banks. There was a great need for equity capital injection. |
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| Tarapore suggested that the government should encourage the setting up of private banks sponsored by industrial houses and institutions to strengthen the banking sector. |
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