Bill to strengthen corporate governance in banks moved in RS

New Delhi, Aug 24: Finance Minister P Chidambaram today moved the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Bill, 2006, which seeks to bring a substantial increase in corporate governance in the banking sector.

Introducing the bill, he said that the key purpose of the Bill was to bring in corporate governance in the sector.

The Bill had been passed by the Lok Sabha on Tuesday.

Initiating discussion on the bill, BJP's Ramdass Agarwal asked the Minister what was the position of nationalised banks and the power's given to them as vis a vis the foreign banks. He said the branches of the nationalised banks should be expanded.

Santosh Bagrodia (Congress) said now there are clear guidelines for the appointment for the Board of Directors to the banks which was absent during the previous NDA regime.

He said in the 19 PSU banks, the government share should not go beyond 51 per cent. The lowest is in the Oriental Bank of Commerce (51.10 per cent) and the highest in Bank of Maharashtra (76.77 per cent).

There should be banking experts in the board other than the bureaucrats.

''The public character of the banks must not be disturbed,'' Mr Bagrodia reiterated.

Calling for a change in the mindset of bankers, Mr Bagrodia noted that in recent times, rural banks had closed down rather than increasing in numbers. ''In past seven years, the number of rural banks has come down so how will rural industry grow?'' he asked. Welcoming the amendments in the Bill, CPI-M member Tapan Kumar Sen wanted government to stop further divestment of banks and to address the problem of severe staff crunch of front desk employees dealing with customers.

Samajwadi Party member Virendra Bhatia spoke highly of the efficiency displayed by foreign banks in customer matters in comparison with the poor service offered by nationalised banks, saying the customer base of the latter was eroding due to this.

His remark evoked a sharp reaction from members of the Opposition benches. Mr SS Alhuwalia, Dr MM Joshi and Ravi Shankar Prasad (all BJP members) and Amar Singh (SP) recounted the discriminatory practice indulged in by ''foreign banks'', while denying politicians credit card and car loans. In this regard, lawyers and police also figured, they added.

TDP member C Ramachandraiah regretted that nominee directors were making little contribution on bank boards. He said not even 10 per cent of them attended board meetings and their presence was a liability rather than a help.

Dr Bimal Jalan, (Nominated) while stating that banks had an important role to play in the Indian context, said public sector banks have reduced non-performing assets to almost half. He further stated that the Indian banking system was regarded as a model system among developing countries.

BJP member Vijaykumar Rupani pleaded that the Finance Minister should take concrete steps for easier loans for small traders and manufacturers.

UNI