New Delhi, Dec 19: The Lok Sabha on Wednesday passed the Banking Bill and the Companies Bill.
The Banking (Amendment) Bill, a major reforms legislation, was passed after the government gave in to the BJP's demand to drop the controversial forward contract bill from the amendment, paving the way for issuance of new licences and consolidation in the sector.
"Since the bill is too important for me to pass, therefore I am bringing the Bill dropping the controversial clauses," finance minister P Chidambaram said, winding up the discussion on the Banking Laws (Amendment) Bill, 2011.
The Bill, which seeks to strengthen banking regulation, was later passed by the voice vote after the amendments proposed by the Left Parties were rejected by the House.
The Bill, along with proposed legislations on pension and insurance, was one of the five key reforms measures on the government's agenda during the current session of Parliament.
The government dropped the controversial changes in the Bill in deference to the wishes of Opposition, the minister said, adding it has accepted all major recommendations of the Standing Committee on Finance.
On the proposal to allow banks to participate in the commodity futures trading, he said, it was based on the recommendations of the Standing Committee on Food and Consumer Affairs and report of the Reserve Bank's working group.
As regards other issues, he said, while RBI would regulate the banking sector, the Competition Commission of India (CCI) would look into competition practices in the banking sector.
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.
The Banking Amendment Bill also seeks to draw foreign investment to the banking sector by raising shareholders' voting rights to 26 per cent from the current 10 per cent. This will renew investors' interest in private sector banks and encourage foreign banks to expand in India by buying stakes in local banks.
Corporates set to open bank accounts
The Bill empowers the RBI, allowing it to supersede bank boards, which is now expected to issue new bank licences to entities including business houses wanting to enter the banking business. It also makes it easier for banks to recover dues. Big corporate houses such as the Tatas, Birlas, Bajaj and Reliance can now enter the banking space.
Further, existing banks will gain as their strategic shareholders will be encouraged by the move to increase voting rights. The amendments will also allow the RBI to inspect books of conglomerates, make board and top management appointments in banks and control transfer of large chunks of shares.
New Companies Bill
The new Companies Bill, when it will come to power, aims to protect interest of employees and small investors while encouraging firms to undertake social welfare voluntarily. The Bill seeks to reform corporate governance by strengthening the hand of the Serious Fraud Investigation Office (SFIO).
It prescribes more stringent rules for auditors, and seeks to protect small investors by regulating entities such as chit funds, the oversight of which was previously a grey area.
Analysts are of the view that the new Companies Bill will serve to the good of Indian companies.