Lok Sabha passes Banking Laws Amendment Bill

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TNI Bureau: The Lok Sabha on Tuesday passed the Banking Laws Amendment Bill, 2012 by voice vote.

The Bill, along with the proposed legislations on pension and insurance, was one of the five key reform measures on the government’s agenda during the current session of Parliament.

The government dropped the controversial changes in the Bill in difference to the wishes of the Opposition, the Finance Minister P Chidambaram said, adding that it had accepted all major recommendations of the Standing Committee on Finance.

The government agreed to drop Forward Markets Contract Clause, which allows banks to trade in futures and keeping the sector outside the purview of Competition Commission.

On the proposal to allow banks to participate in the commodity futures trading, Mr. Chidambaram said, it was based on the recommendations of the Standing Committee on Food and Consumer Affairs and the report of the Reserve Bank’s working group.

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The Bill, however, paves the way for the RBI to issue new banking licenses to private sector.

Finance Minister clarified that RBI will continue to be the regulatory authority for the banking sector and the Competition Commission of India will deal only with competitive practices.

The Banking Bill also seeks to raise the voting rights of investors in private sector banks to 26 per cent, from 10 per cent. It also allows the RBI to supersede boards of private sector banks and increase the cap on voting rights of private investors in PSBs to 10 per cent, from one per cent.

On consolidation in the banking sector, Mr. Chidambaram said, some of the smaller banks in public sector would be merged to make two to three world-class banks in India.

The Minister also expressed the commitment of the government to infuse Rs.15,000 crore into public sector banks in the current financial year and retain their basic character. He said, six thousand Bank branches will be opened each year and plans are underway to recruit over 84 thousand employees this year.

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