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Block transfer of SBI to govt: Tarapore
S. Satyanarayanan
Tribune News Service

Let corporates in: Panel

The RBI should evolve policies to allow, on a case-by-case basis, industrial houses to have a stake in Indian banks or promote new banks. The policy may also encourage non-banking finance companies to convert into banks, he said.

New Delhi, November 15
The transfer of ownership of the State Bank of India (SBI) to the government should be blocked by Parliament as it will not only be bad in principle, but disastrous in practice, Mr S.S. Tarapore, who headed the committee on fuller capital account convertibility, said here today.

“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. My own personal view is that the transfer of the ownership of the bank to the government, which on the face of it appears to be a mere technical accounting arrangement, is bad in principle and disastrous in practice,” Mr Tarapore, former Deputy Governor of the RBI, said.

“There should not be a hurried legislation sanctifying the transaction. The government has enough problems handling nationalised banks and the RBI should not transfer its problems onto the government,” he said, asserting that the transfer of the SBI ownership to the government would be a major setback to the credibility of transparency of the financial sector reform process, built up so assiduously over the past 15 years.

Pointing that the origin of the proposal to transfer the ownership of the SBI lies in the recommendation of the Committee on Banking Sector Reforms (Narasimham II, 1998) that a regulator should not be an owner, Mr Tarapore, who was here to address an interactive session on “Towards Fuller Capital Account Convertibility”, organised by the FICCI, said. “I am afraid that implementation of this recommendation has been miscued.”

“The spirit of the recommendation was certainly not that once the regulator (RBI) should transfer its ownership of the SBI to an ever bigger regulator (government) and that too in a cashless transaction,” he said.

Mr Tarapore said the FCAC committee had urged that this impending transfer should be put on hold to avoid an aggravation of the impasse on capital strengthening of public sector banks.

“Even if majority public ownership of banks is continued, the SBI would not face the same dilemma as the nationalised banks, as the RBI can easily meet the enhanced capital requirements of the SBI,” he argued.

Asserting that strengthening of the banking sector in the country is one of the key factors for realising the goals of fuller capital account convertibility, Mr Tarapore favoured allowing industrial houses to have a stake in Indian banks or promote new banks.

Mr Tarapore also asserted that the minimum share of the government/RBI in the capital of the public sector banks should be reduced from the present 51 per cent (55 per cent for SBI) to 33 per cent.

“It is not necessary to hold 51 per cent stake to control…In most of the companies, Tatas does not hold 51 per cent stake…the government should give up control (in public sector banks) without giving up public sector character,” he said.



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