FDI hike for pvt banks after Budget

NEW DELHI: The government has decided to take it a little easy on the FDI (foreign direct investment) front. At least as far as the banking front is concerned. It will now bring in a roadmap to hike the FDI limit in private banks after the Budget. The government has already raised the FDI limit in telecom and aviation, and has drafted an action plan for raising the foreign investment cap in retail and pension funds. With the finance ministry busy with Budget preparations, officials said it makes sense for the government to avoid a face-off on the issue with UPA coalition partners. The FDI hike for private banks had been announced in March '04, but the finance ministry has been unable to lay out a road map for the same, partly because of opposition from the Left The government will bring in a road map to hike the FDI limit in private banks after the presentation of the budget. Senior government officials said a cautious approach makes sense as the finance ministry is in the middle of budget preparations and wants to avoid a face-off on the issue with the partners of the ruling coalition. Government officials, however, added that they were optimistic of being able to announce the policy after the budget. They pointed to the rise in FDI limit for telecom to indicate their seriousness with regard to allowing higher FDI in private banks. While the FDI hike for private banks had been announced in March, 2004, the finance ministry has been unable to lay out a road map for the same. This was partly because of the strong opposition from the Left parties in the United Progressive Alliance. According to the officials, even though the finance ministry makes it a point to begin implementation of all budget promises before the next budget, they will make an exception in this case. Significantly, at a breakfast meeting with the Prime Minister, the Left parties were promised the government would provide them with a consultation paper on the issue soon. But the parties are yet to receive anything from the government so far. Finance minister P Chidambaram had earlier said the government would ensure safeguards for the proper working of PSU banks, while enabling greater FDI in private banks. Currently, foreign banks are allowed to pick up to 49% equity in Indian private banks. The road map will effect far-reaching reforms in the banking sector as many of the private banks are facing problems in raising fresh capital. The Reserve Bank of India had circulated draft guidelines on this in July. The Indian banking sector has 27 PSU banks, two dozen private banks and about a dozen foreign banks, besides over 200 regional rural banks. The UPA government is committed to creating a financial sector which could foster 8% GDP growth and the roadmap is one of the steps towards this goal.

FDI hike for pvt banks after Budget

. At least as far as the banking front is concerned. It will now bring in a roadmap to hike the FDI limit in private banks after the Budget.

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