Govt to table Banking Regulation Bill in winter session: Bansal

New Delhi, Oct 18 (UNI) The Government will introduce the new Banking Regulation Bill in the winter session of Parliament and remove 10 per cent cap on voting rights in concerned stake holders to facilitate consolidation among private banks, Minister of State for Finance Pawan Kumar Bansal said today.

Mr Bansal said the Government has already initiated talks with various political parties including the Left to evolve consensus for removing 10 per cent Cap on voting rights.

''Various proposals on capping are being examined by the government to ensure that consolidation process among private banks takes place logically and a decision on the issues would shortly be concluded,'' said Mr Bansal, while releasing the Assocham study on 'Consolidation of Indian Banks -- Restructuring for Global expansion.' Mr Bansal expressed concern saying that mergers and consolidation in banking sector would be difficult if 10 per cent voting cap remains in existence for long and therefore it is in view of this that the government was in constant touch with Left and other allies for persuading them to facilitate easier transition of new Banking Regulation Bill in the winter session.

The Minister allied fear that are growing in certain quarters of Indian society and polity that amendment in the Banking Regulation Act would result into taking over of Indian banks by multinationals, saying the government wants consolidation among private banks and that not in state-owned banks.

He also said consolidation was necessary to facilitate larger access to institutional credit and even larger financial enclosure by masses as currently 27 per cent of people have access to banking finance.

Mr Bansal said the government wanted to enhance this percentage enhancement to spread larger access of people to banking credit which would be possible through consolidation in banking sector.

The Parliamentary Standing Committee on Banking has already given its comments and opinions on the bill and it would be the efforts of the UPA government to place new and modified banking Act in place in next few months so that structuring and consolidation in banking sector take place without resistance, he said.

On a question if there would be a particular time frame fixed by the government for affecting its consolidation process among private banks, Mr Bansal answered it negative saying it is for the individual banks and their boards to decide for the consolidation and that government would not intervene on this issue.

Assocham Investment Committee Chairman S K Jindal said the government should create adequate consensus so that consolidation process in private banks and even state owned banking system should come to an end by 2009.

In view of Assocham, if consolidation takes place with smooth transition it will enhance the capital base of banking system and ensure easier credit take off not only to industry but also agriculture sector if India has to sustain its 8 per cent plus GDP growth rate in next few years, Mr Jindal added.

The Assocham study has also said the government should reduce its equity holding in all scheduled commercial banks below 51 per cent to ensure greater autonomy for the banks along with the wider choice to work for consolidation.

The study said the consolidation will reduce banking operation costs and trasaction costs, besides raise the capital base and effect optimal utilisation of banking resources for higher banking growth.

For deriving synergies between specific strengths of public sector and private banks, it would be desirable to try their voluntary mergers, as inter Public sector amalgamation or inter Private sector integration would not yield commensurate results, it said.

Therefore, the legal process for Public sector and Private Banks merger would require to be simplified by suitably amending the Banking Regulation Act and the Companies Act. The sooner are the decisions on dilution of state stakeholding in public sector taken the easier it would be for the merger initiatives to crystallise, which hitherto are in inert mode.

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