Roadmap for banking sector reforms soon: FM

NEW DELHI: Finance Minister P Chidambaram said on Saturday that banking reform roadmap allowing foreign banks to pick up to 74 per cent equity in Indian private banks was being fine-tuned and would be announced early next week RBI Governor Y.V. Reddy has come for this purpose We are dotting the I's and crossing the T's, he said, after a two-hour long meeting with Reddy. Later, Reddy had a meeting with Economic Affairs Secretary Rakesh Mohan to go into the fine print of the roadmap. The roadmap would be unveiled on Monday or Tuesday after approval from Prime Minister Manmohan Singh, Chidambaram said. Presently, foreign banks are allowed to pick up equity in Indian private banks only up to 49 per cent. Though the government had announced in May last year that the FDI cap would be raised to 74 per cent, the guidelines had not been worked out as yet. The roadmap will affect far-reaching reforms in the banking sector as many of the private banks are tottering. The RBI had circulated draft guidelines for this purpose last July. The roadmap is likely to include guidelines for consolidation of public sector banks; a few of them have already indicated their plans for mergers in the next few months. The banking sector is crowded with nearly 100 state, private and foreign banks, besides over 200 regional rural banks. The UPA government is committed to creating a financial sector which could foster 8 per cent GDP growth and the roadmap is one for the steps towards that The Finance Minister had promised to announce the roadmap before December end but it got delayed slightly because of Tsunami. Budget may have plans for using forex for infrastructure Union Budget is likely to come up with a roadmap for utilising burgeoning foreign exchange reserves for infrastructure development Planning Commission Deputy Chairman Montek Singh Ahluwalia and Planning Secretary Rajiv Ratan Shah met Finance Minister P Chidmbaram on Saturday in this regard. We had a very successful meeting. It was part of the Budget discussions. Both Gross Budgetary Support and utilisation of foreign exchange reserves for infrastructure were discussed, Ahluwalia said, after nearly a two-hour long meeting. Declining to comment on this aspect he said, that the budget may have details for utilising forex reserves now at nearly 130 billion dollars. Planning Commission had asked for stepping up GBS to Rs 1,95,000 crore, but indications are that it may get about Rs 1,76,000 crore in the Budget In 2004-05 Budget, GBS allocation was Rs 1,45,000 crore. Ahluwalia had earlier floated the idea of utilising five billion dollars of forex every year for the next three years to fill critical gaps in infrastructure . But RBI had said using forex for building infrastructure would lead to increased money supply affecting inflation apart from widening the fiscal deficit.

Roadmap for banking sector reforms soon: FM

The FM has said that reform facilitating foreign banks to pick up 74% stake in private sector banks will soon be unveiled.

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