Tarapore opposes government''s acquisition of RBI''s stake in SBI

16 Nov 2006

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Former RBI governor SS Tarapore, has opposed the finance ministry's decision to take over RBI's 59-per cent stake in the State Bank of India. Speaking at a seminar today Tarapore said, "The government already has many problems including budget constrains while handling nationalised banks."

The government wants to amend the SBI Act to enable it to buy out RBI's stake in India's leading bank. "The transfer of RBI's ownership to the government will be a major setback to the creditability of transparency of financial sector reforms."

He recommended that Parliament should block the clauses in the SBI Amendment Bill relating to transfer of RBI's ownership in SBI. Citing the Narasimham committee on banking sector reforms, which had recommended in 1988 that a regulator should not be an owner in SBI.

Tarapore, however countered the government using the Narasimham committee's view by saying, "The spirit of the recommended was not that one regulator (RBI) should transfer its ownership in SBI to an even bigger regulator (government) and even that too in a cashless transaction."

The Tarapore committee has suggested that the minimum share of the government or RBI in the capital of public sector banks should be reduced from present 51 per cent to 33 per cent. The committee had also asked RBI to evolve policies to allow business groups to have a stake in Indian banks or promote new banks on a case-to-case basis. The policy may also encourage non-banking finance companies to convert into banks.

The Tarapore committee has laid down a five-year roadmap towards a free float of the rupee with three distinct phases. It has recommended a cautious and incremental movement towards a free float after careful evaluation of each phase.

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