The banking and monetary regulator has reacted to State Bank of India's chairman Mr. Pratip Chaudhuri's comment on viability of cash reserve ratio (CRR). RBI Dy. Governor KC Chakrabarty commented with strong words against Chaudhuri's vews on 'phasing out CRR'.
Mr. Chakrabarty was present at the seminar organized by Great Lakes Institute of Management on systemic risk. He stated that banks must work within the guidelines handed to them by the regulator and further adding the regulator's disdain by saying "If the SBI Chairman is not able to do the business in this regulatory environment, he has to find out some other place."
Earlier Chaudhuri had suggested phasing out CRR and stated that CRR increases the cost of business for the bank and is not benefitting anybody. Further adding "When CRR is not applicable to insurance companies, non-banking finance companies and mutual funds that also mobilise funds from the public, it is an unfair imposition on banks."
Speaking on the position of SBI in the banking sector, Mr. Chakrabarty said that position of SBI is too large in the sector, using the analogy "Obviously, it is SBI. It is too big a tree. If you fail to protect the SBI tree, it (the fire) may spread to other banks and it will turn out to be a systemic failure."