Bill to amend Banking Regulations Act hangs fire

The amendment to Banking Regulations Act, which at that time was touted as a game changer, was proposed seven years ago, but is yet to see the light of the day.

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Soon after the Bill was introduced in Parliament, the House was dissolved. The key proposal in the bill was to change the voting rights equivalent to that of the proportion of shares held by an individual. Voting rights are now capped at 10% per shareholder even though the holding is larger. This was to be the carrot for international investors and for strategic investors.

When the bill was re-introduced after the elections to the new Parliament, it was referred to the standing committee for review.

The Opposition and the Left objected to the amendments on removing the cap on voting rights on the grounds that banking is a sensitive business and it should be tightly regulated.

The finance minister has again promised to table the bill before Parliament, but this time he may face resistance not only from Opposition parties, but also from allies, who stall new measures. The bill also empowers the Reserve Bank of India to supersede the board of banks and has an enabling provision that no individual or an entity can acquire stake in a bank above 5% without their approval.

As of now, the Reserve Bank of India exercises these options under its power to issue direction, but not under the legal framework.

Also read: Budget 2012: A tale of dire times, broken promises & more

(Contributed By Gayatri Nayak, Sangita Mehta, Anita Bhoir & Ruchira Roy)