The Union Cabinet on Thursday gave its approval for introduction of a Banking Laws Amendment Bill 2011 in Parliament. This Bill seeks to among other things lift the 10 per cent voting rights cap in private sector banks and pave the way for the Reserve Bank of India to give some additional banking licences to private sector players.

The proposed Bill will seek to amend the Banking Regulation Act, 1949, so as to remove the voting rights cap for private sector banks. The legislative intent will be to make voting rights commensurate with economic ownership.

Indications are that the Banking Regulation Act, 1949, will be amended to prescribe a minimum capital of Rs 1,000 crore for every private sector bank. The current capital requirement is Rs 300 crore. Based on the feedback from a discussion paper issued in August 2010, the RBI has proposed some amendments to the Banking Regulation Act including a change in the minimum capital requirement.

The UPA Government had in 2005 brought a Bill to amend the Banking Regulation Act 1949. This Bill was, however, not enacted into law.

The Finance Minister, Mr Pranab Mukherjee, has now in his latest Budget speech said that the financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. He also said that the UPA Government is committed to take this process further.

Mr Mukherjee specified Banking laws Amendment Bill 2011 as one of the seven legislations in the financial sector that would be moved in Parliament. He has also promised to bring suitable legislative amendments to the Banking Regulation Act in the current Budget session itself.

The other legislations in the financial sector that are likely to be pursued are the Insurance Laws (Amendment) Bill 2008, the Life Insurance Corporation (Amendment) Bill 2009, the revised Pension Fund Regulatory and Development Authority Bill, Bill on factoring and assignment of receivables, State Bank of India (subsidiary banks laws) Amendment Bill 2009 and Bill to amend the Recovery of Debts due to banking and financial institutions and SARFAESI Act 2002.

krsrivats@thehindu.co.in