The bills relate to amendment of banking laws and empowering the Reserve Bank of India to supersede the board of a bank.
Besides, the RBI will also bring down its minimum permissible stake in the State Bank of India from 55 per cent to 51 per cent and the face value of SBI associate banks' shares will come down from Rs 100 to Rs 10, thus paving the path for their equity floats.
Finance Minister P Chidambaram said in his Budget statement that the standing committee on finance has recommended all these bills. "I would urge honourable members to cooperate with the government and pass these bills," he said.
In December, the committee gave its nod to remove the 10 per cent voting right cap on shareholders of private banks permitting proportionate voting rights to shareholders.
This will be done through amendment of the Banking Regulation (Amendment) Bill, 2005.
However, the voting right in public banks would not change as they are governed by the provisions of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980 and the SBI Act, 1955 and SBI (Subsidiary Banks) Act, 1959. The move would pave the path of consolidation in Indian private banks.
The standing committee has also given green signal to permit banks to issue preference shares. The panel has, however, put the rider that the RBI should lay down clear guidelines on the extent to which banks would be allowed to issue such shares.
Issue of preference shares would be beneficial to banks in raising the required capital to support credit growth. The proposal is to allow banks issuance of perpetual or irredeemable and redeemable share with provisions for conversion of such shares into equity.
The amendment to Banking Regulation Act also proposes to remove the legislative barriers on statutory liquidity ratio to provide flexibility to the RBI to determine the floor and ceiling of SLR. This will also empower the RBI to supersede the board of a scheduled commercial bank.
The RBI, at present, has powers to remove individual director and officers but it cannot supersede the board even if it is not competent to protect depositors' interest.
There is also another pending bill, to amend the RBI Act, 1934. This will give freedom to the central bank to determine the cash reserve ratio for banks. At present, the CRR cannot come down below 3 per cent.
The bill to amend the RBI Act also proposes to empower the central bank to deal in derivatives. Two more bills expected to the passed in the Budget session relate to the payment and settlement system and the pension regulatory authority.
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