State Bank Chairman Pratip Chaudhuri's call last week for abolishing the mandatory Cash Reserve Ratio (CRR) had attracted a sharp reaction from RBI Deputy Governor K C Chakrabarty. CRR is the amount of deposits that banks park with the RBI as a prudential measure without earning interest on it.
Chakrabarty had this week frowned on Chaudhuri's contention saying, "If the SBI chairman is not able to do business as per our regulatory environment, he has to find some other place."
In his first public comment since the controversy began on August 23, Subbarao told the bankers at a FICCI-IBA here, "I have an important announcement to make. Late last night I signed off a paper forming a committee. The terms of reference for the committee are whether we should continue with CRR or not. Members of the committee are Dr Chakabarty and Shri Pratip Chaudhuri.
"Process of the committee will be that both of them will be locked up in a room until they reach a conclusion and the time frame is that they will not submit their report till my term as governor is over," Subbarao told the audience in a lighter vein.
After the speech, when asked if he was serious or joking, Subbarao retorted: "What do you think?"
However, both Chakrabarty and Chaudhuri continued their spat publicly at the same venue, after Subbarao left.
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While the SBI chairman termed the statement of the Governor as "a joke", Charkabarty said the SBI chief is not ready to listen to the regulator, and there cannot be any regulatory issues.
Significantly, the deputy governor, when he was a banker, had made a similar demand. MORE