This the first State Bank AGM to be held in Mumbai after the bank went public. The last time the State Bank had held its AGM in Mumbai was in 1975 when it was wholly owned by the Reserve Bank.

A comprehensive Act which would govern the working of commercial banks, all India financial institutions and other non-bank financial intermediaries would be an ideal situation, Verma said, adding "as a matter of fact no separate statutes should exist governing different financial intermediaries when there is growing convergence among their functions."

The State Bank of India Act, which governs the working of the bank, needs to be amended, he said. The Law of Evidence, the Transfer of Property Act, the Sick Industrial Companies Act, the Banking Regulation Act and Reserve Bankof India Act are examples of legislation which are in urgent need for redrafting, Verma said, adding the evolution of the legal framework has not kept pace with the changing commercial practices and financial reforms.

"There are several pieces of legislation affecting bankers which have become outdated in today's context. A related issue is the question of institution-specific regulation. It is suggested that in certain quarters in view of the multifarious activities conducted by modern banks a function-specific regulation would be a more suitable form of regulation," he said. A function-wise regulation of the banks, however, would make the task of regulation extremely complex and co-ordination amongst different regulators would be difficult.Verma also called for setting up of an effective self-regulatory organisation for the banking sector which will monitor activities of the members by laying down the ground rules and settling disputes.

"In the pre-reform days, the Indian Banks' Association performedthe role of a self-regulatory organisation (SRO) admirably. The reforms have brought a sea change in the structure of the industry and IBA has to function as an SRO and it is imperative that its membership base is broadened and sufficient authority delegated to it," the SBI chief said. The public sector banks need to have professional boards with adequate representations from the shareholders and these boards should be answerable to the owners which also include the centre and the Reserve Bank, he said.

State Bank rules out M&As, opts for subsidiarisation

Ruling out the merger and acquisition route for expanding the size of the State Bank of India, chairman MS Verma said that the bank would follow the subsidiarisation route whenever a new business opportunity requiring different types of skills appears on the horizon.

"Subsidiarisation is a time-tested strategy adopted by the bank since 1980,'' he said.

The merger and acquisition route provides a quick step forward in this direction proferringopportunities to share and, thereby, reduce personnel and technology costs while expanding delivery platforms for covering a wider range of customers. However, this may not be expedient in the case of the bank as the legal constraints, social expectations and cultural differences between organisations could stand in the way of gaining efficiencies of the scale, he said.