Banking Laws Bill in Parliament on Monday

Finance minister Pranab Mukherjee will move an amended Banking Laws (Amendment) Bill in Parliament on Monday. The Bill is likely to cap shareholders’ voting rights in private banks at 26% irrespective of their total holding, diluting the provisions of the original bill which had proposed to align voting rights in proportion to their shareholding.

The Bill, which was introduced in Lok Sabha in March 2011, seeks to empower Reserve Bank of India to dismiss a bank’s board and force a reconstruction of the board to protect the interests of depositors, shareholders and employees.

This will pave way for the central bank to grant licences to industrial houses to set up banks.

The other proposals in the Bill include increasing voting rights of an entity in a nationalised bank to 10% from the existing 1%. Besides, once legislated, the Bill will provide the RBI powers to ask for information from banks’ associate companies.

In addition, the Bill provides for taking mergers and acquisitions in banks outside the purview of the Competition Commission of India (CCI).

The Bill will also pave the way for issuing new bank licences to private sector entities.

In the draft guidelines, which was issued last year, the RBI  has specified a wide range of conditions, including a minimum networth of R500 crore, for companies to be eligible setting up banks in India.

Under the draft norms companies that have an exposure of 10% or more to real estate and brokerage businesses in terms of revenue or assets are not eligible to seek licences. (Times of India).