Explaining the mammoth grip of public sector banks on India's banking system, Tarapore said that even if the new private sector banks were to grow at twice the rate of growth of the public sector banks in the next five years, the share of new private sector banks in deposits would only grow from the present three per cent to six per cent.

He said that it becomes impossible to operate an efficient public sectorbanking system if the monolith is required to develop at a pace dictated by the weakest segments of the system. Towards this, he re-emphasised the role of narrow banking, originally mooted by him in the report on capital account convertibility.

He said it may be very difficult to get the authorities convinced about implementing narrow banking because the forces against the concept is too big. "The narrow banking may be unacceptable to the authorities; if so, a clear and viable alternative strategy must be quickly implemented for effectively dealing with weak banks. We cannot afford to wallow in the bureaucratic brilliance of equivocation," he said.