The government today tabled a Bill in the Lok Sabha to raise the voting rights of shareholders of nationalised banks to 10 per cent from the existing 1 per cent, a move that will make investment in state-owned banks more attractive.
The Banking Laws (Amendment) Bill 2011 proposes to raise the ceiling on voting rights of shareholders of nationalized banks from 1 per cent to 10 per cent, the statement of Object and Reason of the Bill said.
In addition, the Bill proposes to remove the voting right restriction of 10 per cent for private sector banks in the total voting rights of all the shareholders of the banking company.
In the case of private sector banks, the voting rights would be commensurate with investors' shareholding.
There are 20 nationalised banks in the country and 22 private sector banks in the country.
The Bill was tabled in the Lower House by Finance Minister Pranab Mukherjee, seeking to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and to make consequential amendments in certain other enactments.
These amendments would enhance the regulatory powers of the Reserve Bank and increase the access of the nationalized banks to the capital market to raise funds required for expansion of the banking business, it said.
Besides, it enables nationalised banks to increase or decrease their authorised capital with approval from the central government and Reserve Bank without being limited by the ceiling of a maximum of Rs 3,000 crore, it said.
It also proposes to give powers to the nationalised banks to issue two additional instruments -- bonus shares and rights issues -- for accessing the capital market to raise capital required for expansion of of banking business.
At the same time, it proposes to confer powers upon the RBI to impose such conditions as it deems necessary while granting such approval for acquisition of 5 per cent or more share capital of a banking company if it considers necessary.
The amendment also proposes to confer power on the Reserve Bank to call for information and returns from associate enterprises of banking companies and also to inspect the same.
The Bill noted that taking advantage of the liberalized environment, banking companies are engaging in multifarious activities through the medium of associate enterprises.
It has, therefore, become necessary for the Reserve Bank as the regulator of the banking companies to be aware of the financial impact of the business of such enterprises on the financial position of the banking companies, it added.
The amendment moved by the government also exempts mergers and acquisitions in the banking sector from the scrutiny of the Competition Commission of India.