Putting all the hopes for major financial reforms aside, the Cabinet has deferred Insurance Bill.
However, it has cleared the Micro-Finance Regulation Bill.
The Finance Minister, Mr Pranab Mukherjee, said that this Bill has been postponed as he needed more time to study the Standing Committee Recommendations. He also indicated that there is need to raise the Foreign Direct Investment limit.
The Bill introduced in 2008, proposes hiking FDI limit from 26 per cent to 49 per cent. But the Standing Committee on Finance recommended retaining the 26 per cent FDI limit. Though the Government is not bound to accept any recommendation, but with less than required number of members to get the Bill passed, it will have to take a political call.
Micro-finance bill
Meanwhile, the Cabinet approved the Micro Finance Bill to be taken up during ongoing session of the Parliament. The Bill proposes the Reserve Bank of India as regulator for the micro financial institutions (MFIs).
This Bill has become important keeping the current situation of MFIs. These institutions were accused of aggressive lending and recovery practices and high interest rates, which attracted calls for regulation.
Once-thriving microfinance sector was devastated by a crackdown more than a year ago by the Andhra Pradesh, which was the industry hub and largest market. The State rules resulted in a drop off in loan collections and a drying up of funding for micro lenders.