Cabinet to take up Bill on bank voting rights

The Cabinet is likely to take up a Bill tomorrow to increase voting rights of stakeholders in banks. The development comes less than a week after Finance Minister Pranab Mukherjee exuded confidence that key financial sector reforms Bills would be legislated this year.

“The Cabinet may deliberate on the Banking Laws (Amendment) Bill 2011, on the basis of recommendations by the parliamentary standing committee on finance,” sources privy to the development told Business Standard.

The Banking Laws (Amend-ment) Bill, 2011, clubs various banking amendment Bills, including changes in the Banking Regulations Act, to increase the voting power of shareholders in banks.

According to the Bill, tabled in Parliament in 2011 and sent to the parliamentary panel, the voting power of stakeholders in nationalised banks would be capped at 10 per cent, against the current one per cent.

In private sector banks, the cap on voting rights of a single entity are scheduled to be increased in proportion to their stakes, against the current cap of 10 per cent of total voting rights.

However, the standing committee, headed by former finance minister Yashwant Sinha, recommended capping this right at 26 per cent. So, the Cabinet is likely to consider a cap of 26 per cent for private sector banks.

Last week, the finance minister had said in Washington, “On the legislative front, we have already committed the preliminary legislative process for the Pension Fund Regulatory Act, the Insurance Act and the Banking Amendment Act. These three Acts, I do hope, would get legislated this calendar year. If not in this Parliamentary session, then in the next.”

His remarks followed Chief Economic Advisor Kaushik Basu claiming he had been misquoted as implying major economic reforms in India would have to wait till the 2014 Lok Sabha elections.

After Standard & Poor’s downgraded India’s rating on Wednesday, all eyes would now be on the government’s reforms programme.