Banking Laws Amendment Bill tabled

The move is expected to make investment in state-owned banks more attractive.

The government on Tuesday tabled a Bill in Lok Sabha to enhance the voting rights of shareholders of nationalised banks. The move is expected to make investment in state-owned banks more attractive.

The Banking Laws Amendment Bill 2011 proposes to raise the ceiling on voting rights of shareholders of nationalised banks from 1 per cent to 10 per cent, as per the statement of Object and Reason of the Bill. The Bill also seeks to remove the current restriction on voting rights of 10 per cent for private sector banks in the total voting rights of all the shareholders of the banking company. In the case of private sector banks,the voting rights would be commensurate with investors shareholding. There are 20 nationalised banks in the country and 22 private sector banks in the country. The Bill,which was introduced by finance minister Pranab Mukherjee will amend the Banking Regulation Act,1949,the Banking Companies Acquisition and Transfer of Undertaking Act,1970,and Banking Companies Acquisition and Transfer of Undertakings Act,1980,and to make consequential amendments in certain other enactments. Significantly,the Bill also seeks to exempt mergers amp; acquisitions in banking sector from scrutiny of Competition Commission of India.

The amendments would enhance the regulatory powers of the Reserve Bank and increase the access of the nationalised banks to the capital market to raise funds required for expansion of the banking business,it said. Besides,it enables nationalised banks to increase or decrease their authorised capital with approval from the central government and RBI without being limited by the ceiling of a maximum of Rs 3,000 crore.

It also proposes to give powers to the nationalised banks to issue two additional instruments bonus shares and rights issues for accessing the capital market to raise capital required for expansion of banking business.

At the same time,it proposes to confer powers upon the RBI to impose such conditions as it deems necessary while granting such approval for acquisition of 5 per cent or more share capital of a banking company if it considers necessary. The amendment also proposes to empower the RBI for information and returns from associate enterprises of banking companies. Taking advantage of the liberalised environment,banking companies are engaging in multifarious activities through the medium of associate enterprises. It has,therefore,become necessary for the RBI as regulator of banking companies to be aware of financial impact of the business of such enterprises on financial position of the banking companies, the Bill said.