Lok Sabha approves Banking bill, Companies bill

[nrj]

The Lok Sabha today passed the Banking Bill and the Companies Bill.

The Baking Bill was passed after the government gave in to the BJP's demand to drop the controversial forward contract bill from the amendment, paving the way for issuance of new licences and consolidation in the sector.

Regarding the Companies Bill the government said the aim is to protect interest of employees and small investors while encouraging firms to undertake social welfare voluntarily instead of imposing that through "inspector raj".

Replying to a debate before the bill was passed by a voice vote, Corporate Affairs Minister Sachin Pilot said through this new legislation, the government intends to make India an attractive and safe investment destination.

He said special courts would be set up for speedy trials, as an assurance to investors that cases will not linger on.

"The new clause (on forward trading) will not be pressed. We will debate the rest of the Bill," Finance Minister P Chidambaram, Finance Minister, told the Lok Sabha when discussions commenced on the Banking Bill. The introduction of this clause was opposed as it did not form part of the Banking Laws (amendment) Bill 2011 that was referred to the Standing Committee on Finance.

The bill aims to draw foreign investment to the banking sector by increasing shareholders' voting rights to 26 percent from the existing 10 percent. This is expected to lead to consolidation in the industry as it will increase investor interest in private banks. Secondly, it will also encourage foreign banks to expand in India by buying stakes in local banks, as they would have greater operational control over their management.

While defending the case for the bill, Chidambaram also said India needs world-class large banks, thereby making the case for consolidation and expansion even stronger.


Chidambaram also said the government plans to infuse Rs 1500 crore into public sector banks to ensure expansion. He said that at least 6,000 new branches will be opened and around 84,000 people will be recruited for the same.

"We have to infuse capital in the banks so that they can lend. The funds will be infused by bonus shares and rights issue," he said.

Post the passage of the bill, the Reserve Bank of India can get moving on issuing new banking licences to private banks. The process for inviting application for setting up new banks could start as early as January 2013.

India's banks are in need of funds to expand operations and meet enhanced capital requirements under Basel-3 norms.

RBI had formulated the draft rules for the issue of new bank licenses to private banks in 2011, but held back on their implementation, urging the government to first get the banking bill approved by Parliament because it said it needed more powers.

However, the minimum capital requirement and guidelines for setting up new banks are still not known. Only those entities that the RBI deems fit and proper will be allowed to set up shop in India. Sources, however, told CNBC-TV18 that preference will be given to non-banking financial corporations as applicants for new licences.

The proposed law will also give the RBI the power to inspect the books of banks' associate companies.

Meanwhile, Chidambaram also said that the much-awaited insurance bill and land acquisition bill will not come up during the Winter Session of Parliament.The two have been deferred till the Budget Session.

Further clarifying on the Banking Bill, Chidambaram said the Competition Commission clause in the Banking Bill has been modified which allows the Reserve Bank of India to remain the banking regulator, while the Competition Commission of India (CCI) would regulate mergers and acquisitions. The Finance Minister, however, clarified that the banking sector is not outside the CCI's purview.

The Banking Laws (Amendment) Bill, 2011 will now be taken up for discussion in the Rajya Sabha, the upper house of parliament.

Speaking to CNBC-TV18 Ficci chief Naina Lal Kidwai welcomed the move and said the government has given a very important signalling by passing the bill as bigger banks are essential for more competition in the banking sector. "There will be many takers for new licences.. banking is a sector that can attract private equity," she said.

Lok Sabha approves banking bill, companies bill | Firstpost

 

[nrj]

Path cleared for new bank licence, foreign investment

"Since the bill is too important for me, I am"¦ dropping the controversial clauses," Chidambaram said. He said the rejected clause was based on the recommendation of another standing committee on food and consumer affairs and a suggestion of an RBI working group.

In his House speech, Chidambaram noted that there was no Indian bank among the top 20 banks in the world, but China had three. There was a need to encourage banks to become bigger. If a bank now were to lend Rs 6,000 crore to a large project, it could be done only through a consortium. This indicated there was no one big enough to lend at that scale. India needed two or three banks of such large size, he said.

Responding to concerns that these reforms would lead to job losses in banks, Chidambaram cited statistics to say that public sector banks were hiring 84,500 people this year and opening 6,000 branches every year. "I cannot foresee our banks retrenching anyone. In fact, we will recruit many more," he said

L&T Finance Holdings, IDFC, Shriram Transport Services, Mahindra & Mahindra Financial Services, Sundaram BNP Paribas are among companies waiting to apply for new bank licences. Others interested are Bajaj Finance, Reliance Capital, Aditya Birla Nuvo and Tata Capital.

Though there is no cap on the number of new licences, it is likely to be restricted to half a dozen initially.

The chairman and chief executive of the Edelweiss group, Rashesh Shah, welcomed the passing of the bill and said for its size, India was among the least banked economies in the world. "We need at least 200 small banks for greater inclusion and economic growth," he said.

Path cleared for new bank licence, foreign investment | mydigitalfc.com

 

[nrj]

Banking Bill passed by Lok Sabha: 5 facts

New Delhi: In the works since around 2005, the amendments proposed in the Banking Laws Amendment Bill, 2011, have been passed in the Lok Sabha. The amendments pave the way for the Reserve Bank of India (RBI) to issue new bank licences, and also opens door for more foreign investment into the sector. Here are five facts about the Bill:

1. Last year, a Parliamentary panel, headed by senior BJP leader Yashwant Sinha, tabled its report proposing amendments to the Banking Bill. Last week, Banking Laws (Amendment) Bill, 2011, was tabled in the Lower House of Parliament. It was widely expected that the amendments would get House nod, but the Opposition staged a walkout saying that some new clauses, which have not been ratified by the Parliamentary panel, have been added to the Bill. Among these, the most contentious clause was allowing banks to invest in commodity futures trading. The Opposition says it will lead to high-risk speculative trading and the investor is at the risk of losing their money, contending that the futures trading watchdog - Forward Markets Commission (FMC) - does not have enough teeth to take action in case there is massive loss of money. It may be noted that in October this year the Cabinet approved the Forward Contract Regulation Act (FCRA) Amendment Bill, which will give more teeth to commodities regulator FMC. The same is yet to get Parliamentary approval. Although there have been no recent public comments from the RBI on the issue of banks getting into futures trading, the bank has in the past objected to the move, saying it could add to the speculative activities of banks. However, Finance Minister P Chidambaram had said the central bank is in concurrence with the government on allowing banks to begin commodities futures trading. The clause was finally dropped.

2. The cornerstone of the amendments to the Banking Bill is a clause which gives powers to the Reserve Bank of India (RBI) to inspect the books of all associates of a banking company. This is a major step as it expedites the process of RBI clearing banking licences to companies who want to foray into the sector. It may be recalled that just some time back, after being prodded by the Finance Ministry, the RBI had put its foot down on the issuance new banking licences, saying it would not approve any licence if it does not get the power to check the books of all the associate firms of a corporate house cutting its teeth on the sector. Now, with the passage of the Bill, the RBI will go ahead with the issuance of new licences.

3. The changes in the Bill also give the RBI the power to supersede the board of a bank for reasons related to fraud or otherwise. It may be noted that in 2004, Global Trust Bank, which was facing severe financial problems, had to be merged with Oriental Bank of Commerce, as the Reserve Bank did not have the rights to take over the bank's board and it had to find a buyer within a day. The changes proposed in the Bill will help RBI avoid such frantic moves.

4. The Bill also enables the government to raise voting rights in state banks such as the State Bank of India to 10 per cent from just 1 per cent now, acceding partially to foreign investors' demands to have more say in Indian banking. The bank employees unions, reluctant that any control is ceded, have strongly opposed this move for years and are set to strike on Thursday in protest. The Bill will allow foreign banks to convert their Indian operations into local subsidiaries or transfer shareholding to a holding company of the bank without paying stamp duty. Foreign banks have long sought these changes to the law which they say would encourage them to expand their operations in India. Under current laws, foreign banks such as Citibank and Standard Chartered have to pay 20-30 per cent tax as capital gains and stamp duty when transferring branches to a new legal entity.

5. The Competition Commission clause in the Banking Bill has been modified. This allows the RBI to remain the banking regulator, while the Competition Commission of India (CCI) will regulate mergers and acquisitions. CCI will have the power to investigate and clear mergers and acquisitions in the banking sector.

Banking Bill passed by Lok Sabha: 5 facts - NDTVProfit.com

 

[Iamanidiot]

@nrj your take on this bill

 

[nrj]

@Iamanidiot

We need capital. But situation needs to be observed before allowing foreigners to trade in futures.

And more lenders are always better if you are on the other end. There are some doubts about temporary impact on value of money.

Expect more licences issued by early next year.

 

[sob]

Last year, a Parliamentary panel, headed by senior BJP leader Yashwant Sinha, tabled its report proposing amendments to the Banking Bill. Last week, Banking Laws (Amendment) Bill, 2011, was tabled in the Lower House of Parliament.

Why was such an important bill not tabled in the Parliament last year? This is scandalous and inserting the Commodity Trading Clause in such a surreptitious manner, in the face of opposition of the RBI also needs to be looked into. There is an agenda that the Government is following and we have to be on the lookout in the absence of a clearly spelled out policy details.

 

[sob]

Last year, a Parliamentary panel, headed by senior BJP leader Yashwant Sinha, tabled its report proposing amendments to the Banking Bill. Last week, Banking Laws (Amendment) Bill, 2011, was tabled in the Lower House of Parliament.

Why was such an important bill not tabled in the Parliament last year? This is scandalous and inserting the Commodity Trading Clause in such a surreptitious manner, in the face of opposition of the RBI also needs to be looked into. There is an agenda that the Government is following and we have to be on the lookout in the absence of a clearly spelled out policy details.

 

[nrj]

New corporate licences on banking are going to be nightmare for regulators.