Business Daily from THE HINDU group of publications
Thursday, Aug 24, 2006
Business Daily from THE HINDU group of publications Thursday, Aug 24, 2006 |
|
|
|
|
|
|
|
|
Money & Banking - Public Sector Banks Bill gives Govt powers to supercede bank boards K. R. Srivats
" We are not going to supersede banks on a whim. The RBI will be involved. The maximum period that we can supersede is six months, extendable by another six months."
New Delhi , Aug. 23 The Centre has dropped its earlier plan of establishing a financial restructuring authority (FRA) for revamping or restructuring of any weak or potentially weak public sector bank. It has instead gone with the Reserve Bank of India's suggestion of appointing an `administrator' to take charge of the board of the public sector bank that has been superseded or dismissed. The decision to have a system of administrator in case of supersession of board is reflected in the amendments that have been introduced in the Banking Companies (acquisition and transfer of undertakings) and Financial Institutions Laws (Amendment) Bill 2005 (Banking Companies Bill) here today.
Amendments
The Lok Sabha on Wednesday passed this Banking Companies Bill after incorporating about 37 amendments, including the one on having a system of appointing an administrator, to the original Bill that was introduced in August last year. Currently, the legislations governing nationalised banks do not provide any mechanism regarding supersession of board of directors of such banks. As it was felt that a mechanism might be necessary in case of weak or potentially weak banks, the Government had, through the Banking Companies Bill introduced in August last year, sought to empower itself to supersede the Board of Directors of any nationalised bank and constitute a financial restructuring authority and appoint a CEO of such bank.
No FRAs
While empowering itself with the powers to supersede the Board, the Centre has however dropped the plan to set up FRAs. The amendments introduced in the Bill now provide for mandatory system of consultation with the RBI in the matter of appointment of an administrator, who will not be an officer of the Central government or State Government. "We are not going to supersede banks on a whim. The RBI will be involved. The maximum period that we can supersede is six months, extendable by another six months. I do not think an occasion will arise for this. But nevertheless, we must have the power. In the event of something happening, we must have the power to take care of that", the Finance Minister, Mr P Chidambaram, told Lok Sabha in his reply to the debate on the Bill on Tuesday. The Banking Companies Bill that was considered by the Standing Committee on Finance had proposed a maximum period of supersession of 3-5 years. The Government now intends to take powers to appoint, in consultation with the RBI, a committee of three or more persons who have experience in law, finance, banking, economics or accountancy to assist the administrator in the discharge of his duties.
More Stories on : Financial Policy | Public Sector Banks | RBI & Other Central Banks
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2006, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|
