S.S. Tarapore: The Colossus
A key architect of the first wave of reforms in banking and finance, he will be remembered for his yeoman contribution to central banking
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Known for his strong views ranging from inflation, banking regulation, central bank freedom to capital account convertibility, economist Savak Sohrab Tarapore was one of the key players in the first wave of reforms in the country. And for his many contributions, BW Businessworld awarded him the Lifetime Achievement for Banking posthumously.
In the first half of the 1990s, as lieutenant to the then Reserve Bank of India (RBI) Governor C. Rangarajan, the diminutive Tarapore shepherded India through the payment crisis, which was followed by the opening up of the economy to foreign investors.
On the banking front, he oversaw a swathe of reforms, the full impact of which is being felt to this day. Some of the most critical of these were the issuance of licenses to a new lot of private banks; the freeing up of domestic lending rates; and the signing of the historic agreement between the Centre and the RBI to phase out adhoc T-Bills; and the two committees he chaired on capital account convertibility.
Though he had no first-hand experience of commercial banking, many of the ills that afflict the sector today were pointed out by Tarapore way back in the 1990s. “When you have surplus liquidity, NPAs are created,” he had told this writer on more than one occasion. It was one of the reasons why he always cautioned banks which harped on growth. ‘You can’t lend your way out of trouble,” he used to say. We continue to pay the price of not heeding his words.
He was also a strong votary that only strong banks need survive. In July 2015, BW Businessworld asked him: Should fund infusion follow house-keeping in state-run banks? Tarapore was blunt: “If it is a desideratum that all have to be capitalised, well ,there is no divine right that all state-run banks can continue to lend, lose money”.
Tarapore continued to be influential opinion maker well after his retirement in 1996. Just how much so can be gauged from then RBI governor’s statement on his passing away in February 2016. Said Raghuram Rajan, “Tarapore was an extremely well regarded central banker, particularly in the areas of economic research and monetary policy. His contributions as a member on the two Narasimham Committees set the tone of first generation reforms in the financial sector. The roadmap he enunciated for India’s journey toward capital account convertibility in the report of the committee on capital account convertibility of which he was the chairman, though much criticised initially, was accepted later by the world as the way to go on the road to convertibility.”