This refers to “RBI's most interesting move” (Business Line, November 4). At a time when indecision is the order of the day, the RBI has announced deregulation of Savings Bank interest rates, after making very clear what direction the rates on Savings Bank balances should take post-deregulation. This is another case where Dr Subbarao's move towards more transparent communication is evident. Till perhaps a decade ago, there was a clear public-private sector divide in the financial sector. Public sector banks got certain ‘monopoly' in the case of government and public sector undertakings' accounts, which, in a way, compensated for the losses incurred in rural business, which essentially involved an unmanageably large number of small and un-remunerative accounts. Private sector banks had a choice to select clientele, and were even provided safety routes such as investment in Rural Infrastructure Development Fund against shortfall in meeting priority sector targets. The competition is chasing its logical end of ‘level playing field', and in the near future, the public-private sector distinction will reduce further. On all fronts, the new private sector banks had an advantage, namely, technology, freedom to manage HR issues on market-related terms, and choice of business. Private sector banks are rightly trying to compete and are likely to taste success sooner than later. The Government and the RBI should see this as a healthy sign and modulate their policies to encourage growth. In the financial sector, supervision of credit and a robust recovery mechanism are pre-requisites for ensuring the health of institutions across public and private sectors.
M. G. Warrier Mumbai (HBL)
