The Anti-Monopoly Ministry is taking on banking reform, calling for an overhaul of Sberbank, the state-controlled retail banking monopoly.

The time has come to determine whether Sberbank is a normal commercial bank -- in which case it should come under intensified scrutiny -- or a socially important structure that the government should be supporting, Sergei Dudkin, head of the ministry's department for protection of competition in financial services, said in an interview published in Vremya Novostei on Friday.

The ministry has called on the government, as Sberbank's owner, to define the banking giant's services and functions and possibly limit Sberbank to purely retail or savings operations, local media reported Friday.

"Sberbank's undoubted privileges should be used to develop, among other things, small businesses and mortgages, that is the 'retail' form of banking," Dudkin said in the interview.

"Privileges must be paid for. The cheap resources that Sberbank has gotten through its closeness with the government must not go toward strengthening its competition advantages."

Sberbank enjoys a number of advantages not available to other commercial banks.

Sberbank has 75 percent of all retail deposits in the country, thanks to a government guarantee not extended to other banks and a network that dwarfs its nearest competitor, which is currently Alfa Bank.

Sberbank's size also gives it economies of scale beyond the reach of other commercial banks.

And Sberbank, 63 percent owned by the Central Bank, has a cozy relationship with the government, servicing state budget accounts and enjoying access to cheap funds, bank watchers say.

The ministry's proposal called for ensuring that Sberbank's deposit and credit rates are set in accordance with market principles.

"The Anti-Monopoly Ministry's answer is to control tariffs. But what the banking sector needs is to be more radical," said Kim Iskyan of Renaissance Capital.

"Sberbank can afford to underprice [other banks] because it is essentially a branch of the Central Bank. So what the Anti-Monopoly Ministry is proposing is nothing more than a band-aid, whereas what is needed is surgery to separate Sberbank from the Central Bank," he said.

"State banks are the biggest, and they strongly influence prices in a given sphere because of their large market share," said Interfax Rating Agency deputy director Mikhail Matovnikov.

"This does not mean that the low interest rates and tariffs are necessarily bad for the economy. ... However, for other commercial banks it makes things noticeably difficult," Matovnikov said.

"The problem is that Sberbank uses not only free government guarantees, but also cross-subsidizes various operations," Matovnikov said.

"In 2000, Sberbank earned more on its portfolio of government securities than its credit portfolio, which is not a very typical situation. This could be viewed as dumping."