NDTV | Updated On: December 19, 2012 10:53 (IST)
The Lok Sabha yesterday passed the Banking (Amendment) Bill, aimed at attracting more foreign investment into the banking industry in yet another move by Prime Minister Manmohan Singh to open up Asia's third-largest economy.
Banking Bill made easy in 10 points:
The Bill was passed after the government earlier yesterday agreed to drop the contentious Forwards Markets Contract Clause, which proposed permitting banks to enter commodity futures trading.
The passage of the Bill was critical to the government as it paves the way for the Reserve Bank of India (RBI) to issue new banking licenses to the private sector. Late November, Finance Minister P. Chidambaram had said the central bank should begin issuing new bank licences, and that amendments to the Bill were simply to formalise the powers that the central bank was seeking. However, RBI governor D. Subbarao had said it would be not possible without fulfilling the enabling conditions.
BJP leader and former finance minister Yashwant Sinha, who heads the Parliamentary Standing Committee on Finance, had demanded that the Bill be referred back to the Standing Committee as the futures trading clause was introduced after the committee had submitted its report on the Bill. Mr. Chidambaram had ruled out sending the Bill for reconsideration.
The Opposition had claimed that allowing banks to trade in commodity futures would lead to high-risk speculative trading, adding that the futures trading watchdog—Forward Markets Commission (FMC)—lacks teeth to take action on a potential substantial loss for investors.
In October this year, the Cabinet approved the Forward Contract Regulation Act (FCRA) Amendment Bill to give more powers to the FMC, but the Bill is yet to get Parliamentary approval.
Although there have been no recent public comments from the RBI on this issue, it had earlier objected to futures trading, saying the step could add to the speculative activities of banks.
The Competition Commission clause in the Banking Bill has also been modified. This allows the RBI to remain the banking regulator, while the Competition Commission of India (CCI) will regulate mergers and acquisitions. CCI will have the power to investigate and clear mergers and acquisitions in the banking sector, the Finance Minister said.
Introduced in the Lok Sabha in March 2011, the Bill also gives the RBI the power to supersede bank boards as well as to inspect the books of associates of banking company.
It also provides for voting rights to investors in private sector banks commensurate with their shareholding. The cap on voting rights for investors in private sector lenders, such as HDFC Bank and ICICI Bank, will now rise to 26 per cent from 10 per cent, and to 10 per cent for government banks, such as State Bank of India, from just 1 per cent. The Bill allows foreign banks to convert their Indian operations into local subsidiaries or transfer shareholding to a holding company of the bank without paying stamp duty. Foreign banks have long sought these changes which they say will encourage them to expand their operations in India. Under the current laws, overseas lenders, such as Citibank and Standard Chartered, have to pay 20-30 per cent tax as capital gains and stamp duty when transferring branches to a new legal entity.
Four bank employee unions had yesterday threatened to go on strike on Thursday to protest against the Bill. The All India Bank Employees Association (AIBEA), Bank Employees Federation of India (BEFI), All India Bank Officers' Association (AIBOA) and National Union of Bank Employees (NUBE) will participate in the one-day country-wide strike (read full story).
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Banking amendment bill cleared by Lok Sabha
IANS – Tue 18 Dec, 2012 8:46 PM IST
New Delhi, Dec 18 (IANS) The Lok Sabha Tuesday passed the Banking amendment bill that aims to attract more foreign investments and pave the way for issuance of new licences and consolidation in the sector.
Replying to a debate in the lower house of Parliament, Finance Minister P. Chidambaram said the regulations needed to be modified to help create "world class" and "world size" banks in India.
"We need at least two-three world class banks... none of our banks is among the world's 20 top banks," Chidambaram said.
The Banking Laws (Amendment) Bill, 2011 will now be taken up for discussion and voting in the Rajya Sabha, the upper house of the Indian parliament, Thursday.
The new regulation increases voting rights of investors in the private sector banks to 26 percent from the existing 10 percent. This will make the Indian banking sector attractive for the overseas investors and is expected to lead to consolidation in the industry.
The new regulation will enable the Reserve Bank of India (RBI) to issue new bank licences, which will help in increasing penetration of banking in the country.
The principal opposition Bharatiya Janata Party (BJP) supported the bill after the government dropped a controversial clause allowing banks to trade in commodity futures.
"Since the bill is too important for me to pass, therefore I am bringing the bill dropping the controversial clauses," Chidambaram said while winding up discussion on the bill in the Lok Sabha.
The bill is likely to be cleared the Rajya Sabha Thursday as the two biggest political parties - Congress and BJP - are supporting it.
Chidambaram said major recommendations of the standing committee of Parliament and the RBI's working group have been incorporated in the bill.
The new regulation also seeks to bring the banking sector under the competition commission purview.
Chidambaram said while the RBI would regulate the banking sector, the Competition Commission of India (CCI) would look into competition practices in the banking sector.
http://in.finance.yahoo.com/news/banking-amendment-bill-cleared-lok-151605312.html
Friday, December 21, 2012
HT Correspondent , Hindustan Times
New Delhi, December 18, 2012
Email to Author
First Published: 19:43 IST(18/12/2012)
Last Updated: 02:26 IST(19/12/2012)
New banking law to allow more players
The Lok Sabha on Tuesday passed the Banking Laws (Amendment) Bill, paving the way for setting up new private banks and strengthening the regulatory role of the Reserve Bank of India. The RBI has now been empowered to supersede bank boards to safeguard depositors and shareholders’ interests, as the RBI will be able to investigate the books of the associate enterprises of a bank.
The bill also raises the ceiling on the voting rights of the shareholders of a nationalised bank from 1% to 10% and eases the voting right curbs on foreign shareholders in an Indian bank from the current 10% cap.
Several industrial houses, including the Anil Ambani-controlled Reliance Group and Mahindra and Mahindra (M&M) group, are keen on setting up banking companies.
It was not without much drama that Chidambaram was able to introduce the bill in the Lok Sabha. Saugata Roy of the TMC claimed that some amendments moved were in violation of the rules of the House. He was soon joined by the Left parties and AIADMK, which led to the House being adjourned twice.
But the Lower House cleared the bill after finance minister P Chidambaram withdrew the clauses that sought to allow banks to trade in futures and keep the sector outside the purview of Competition Commission.
“Since the bill is too important for me to pass, I am bringing the bill, dropping the controversial clauses,” Chidambaram said.
Naina Lal Kidwai, country head of HSBC India, said, “We hope... new bank licences may be issued to the private sector soon.”
http://www.hindustantimes.com/StoryPage/Print/974618.aspx
Public sector bank unions threaten to go on strike on December 20
Press Trust of India | Updated On: December 19, 2012 10:44 (IST)
Four bank employees unions have threatened to go on strike on Thursday to protest against the Banking Laws (Amendment) Bill.
"If the strike materialises, a section of the bank's employees may take part in the proposed strike on the said date (December 20), in which case, the normal functioning of the branches or offices of the bank may get affected," Indian Bank said in a filing on the Bombay Stock Exchange.
The All India Bank Employees Association (AIBEA), Bank Employees Federation of India (BEFI), All India Bank Officers' Association (AIBOA) and National Union of Bank Employees (NUBE) have given a call for one day country-wide strike.
According to AIBEA General Secretary C H Venkatachalam, ever since the government initiated the "neo-liberal economic reforms policies", there have been repeated attempts to liberalise and privatise banking sector.
"We have been consistently fighting against these policies and have conducted agitations and strike actions on various occasions in the past whenever the Government took any measures of banking reforms, because these are not in the interest of our country and our economy," he said.
The unions claimed that about 5 lakh employees of various public sector banks would participate in the strike.
The employees’ unions are saying that the amendment to the banking laws will dilute the interest of public sector banks.
In August, employees of public sector banks had gone on two-day nationwide strike opposing banking sector reforms and outsourcing of non-core activities.
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