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Banking Bill paves way for new banks, foreign investment

This article was posted on Dec 19, 2012 and is filed under Press Releases

The government on Tuesday cleared the decks for the Reserve Bank of India ( RBI) to initiate the process to issue new banking licences and widened the window for infusion of capital into the banking sector.

The Lok Sabha cleared the Banking Laws (Amendment) Bill, 2011, after Finance Minister P Chidambaram agreed to drop the contentious proposal on allowing banks to do futures trading. He also clarified status quo would be maintained on the jurisdictions of RBI and the Competition Commission of India ( CCI) in the banking sector.

“Since it is important that the Bill is passed, I am dropping the controversial clauses.” While the central bank would regulate the banking sector, the competition watchdog would look at anti-competitive practices, Chidambaram said.

BANKING LAWS (AMENDMENT) BILL, 2011
ACTION
  • RBI gets more powers, can supersede bank board
  • Voting rights of shareholders in banks go up
  • Banks not allowed to trade in commodity futures
  • RBI to be banking regulator, CCI to regulate M&As
IMPACT
  • Industrial houses to get licences to operate banks
  • More foreign and domestic investment to flow in
  • Could have proved to be a hedging tool for banks
  • Bank M&As may need clearance by two regulators

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