Roadmap to take some time: FM

NEW DELHI: The roadmap for allowing foreign direct investment (FDI) hike in private banks from 49% to 74% would take some time, finance minister P Chidambaram said on Monday.

“Please remember that a notification was issued in March ‘04 (allowing FDI hike in private banks). We are now working on the roadmap to safeguard proper working of PSU banks and also to enable greater FDI in private banks,� he said on the sidelines of Petrotech ‘05 conference here.

He said the roadmap was being fine-tuned. “We are dotting the `I’s and crossing the `T’s,� he said. Mr Chidambaram had met RBI governor YV Reddy on Saturday to discuss mainly the roadmap for banking sector reforms.

Mr Reddy also had a meeting with economic affairs secretary Rakesh Mohan to go into the fineprints of the roadmap.

At present, foreign banks are allowed to pick up up to 49% equity in Indian private banks. Though government had announced in May last that the FDI cap would be raised to 74%, the guidelines have not been worked out as yet.

The government was also considering raising the voting rights limit from the current 10% to enable foreign players have management rights.

The roadmap will effect far-reaching reforms in the banking sector as many of the private banks were facing lack of capital.

The Reserve Bank of India had circulated draft guidelines for this purpose in July last.

The roadmap is likely to include guidelines for consolidation of public sector banks with a few of them already indicating plans for mergers in the next few months. 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.

The finance minister had promised to announce the roadmap before December end but it got delayed because of the tsunami disaster.