Convert Weak Banks Into Narrow Banks

The Tarapore Committee has recommended that the weak banks should be converted into what are called `narrow banks and has suggested that their operations must be severely restricted. This has been proposed as the panel is alarmed by the fact that the systemic dangers of some of the weak banks are growing at rates faster than the system.

In case of the narrow banks, the panel has said that their incremental resources should be curbed only to investments in government securities.

In extreme cases of weakness, the committee has suggested a two-pronged approach. First, these banks should not be allowed to increase their advances. Second, severe restraint should be imposed on their liability growth.

The committee has made it clear that such measures are unavoidable if the financial system is to be safeguarded during the move towards CAC.