The Government’s on-off reforms thrust received a major boost as the Lok Sabha on Tuesday passed the much-debated Banking Bill, paving the way for issue of new banking licences to the corporate sector.

The Bill was passed after Finance Minister P. Chidambaram withdrew a controversial proposal that sought to allow banks to undertake forward trading in goods (including commodities).

Chidambaram withdrew this proposal on Tuesday in the wake of stiff resistance from the Opposition, which demanded that the new clause be referred again to Standing Committee on Finance.

Voting rights

The Finance Minister, however, moved several other amendments to the Banking Laws (amendment) Bill 2011, including increase in the voting rights of shareholders in private sector banks from the current 10 per cent to 26 per cent. The RBI may increase, in a phased manner, such ceiling on voting rights from 10 per cent to 26 per cent, according to the amendment moved today.

The Government had in the original Bill proposed that voting rights in public sector banks be commensurate to the shareholding.

This was, however, not accepted by the Standing Committee on Finance which suggested that the voting rights be capped at 26 per cent for private sector banks.

For public sector banks, the voting rights are proposed to be capped at 10 per cent as against the current 1 per cent.

This Banking Laws (amendment) Bill is crucial as it seeks to confer additional supervisory powers on the RBI, including one that supersedes the boards of banking companies.

This is expected to pave the way for the RBI to issue new banking licences to certain corporate houses in the country.

> Srivats.kr@thehindu.co.in

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