Cabinet clears ordinances on banks, markets

NEW DELHI: The Cabinet on Friday gave its nod for the promulgation of the Banking Regulation (Amendment and Miscellaneous Provisions) Ordinance ’04, Securities Contract (Regulation) Act 1956 as well as the Depositories Act 1996.

This forms part of an effort to strengthen financial market regulation. In addition, the Reserve Bank of India (RBI) was also empowered to issue a licence to urban cooperative banks, following the Supreme Court order staying the same.

The decision to promulgate the two ordinances — to amend the Securities Contracts (Regulation) Act of 1956 and Depositories Act of 1996 — was taken at a meeting of the Cabinet, chaired by Prime Minister Manmohan Singh.

The Securities Contracts (Regulation) Act and the Depositories Act are sister acts and are being amended to prevent undesirable transactions in stock exchanges and make them professional, strong and more efficient.

The amendments to the SCRA would enable market regulator Sebi to approve the corporatisation and demutualisation of bourses, which would bar brokers from managing stock exchanges.

The motivation for the ordinance came from the Joint Parliamentary Committee that probed the stock market scam of ’01.

These new legislations would bring in “greater efficiency� in the market, while strengthening existing regulations. The bill, to these effects, would be introduced during the next Parliament session to replace the ordinance.

The ordinance for amending the Banking Regulation Act will also carry out legislative changes to ensure that depositors’ money in cooperatives is protected.

The Cabinet also approved the merger of Global Trust Bank with state-owned Oriental Bank of Commerce.

The RBI found that the audited balance sheet for year ended March ’02 showed a net worth of Rs 400.4 crore, while inspection revealed that it was actually negative.