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In what could be a big setback for the Finance Minister, Mr Pranab Mukherjee, the Standing Committee of Finance has indicated that it might not be able to submit its report on banking and insurance Bills during the winter session, which is scheduled to start from November 22.
Sources said, “Serious differences within the committee are yet to be resolved. So, it is not sure if the reports will be tabled during the winter session.” The banking Bill was referred to the standing committee in March, while the Insurance Bill was sent to the committee in 2009.
Members of the committee have objected to increasing voting rights in proportion to the shareholding. The Bill proposes to raise the ceiling on voting rights of shareholders of nationalised banks from one per cent to 10 per cent. In the case of private banks, the proposal is to remove the existing restrictions on voting rights limited to 10 per cent.
“Why is there a need to increase the voting rights?” members have asked. At the same time, some have also raised queries on granting new banking licences. “It is not just the Left parties who are raising their voices against the provisions, but members from other parties too, including the Congress,” the sources added. The situation is almost the same on the insurance Bill.
The committee felt there was a need for more consultations. One of the key provisions of the Bill proposes to confer power upon the RBI to call for information and returns from the associate enterprises of banking companies and inspect the same, if necessary. The RBI has indicated that without such a power, it would not be possible to issue new banking licences. So, any delay in passing the Bill will make the wait longer for awarding new banking licence.
On the other hand, new roadblock for the Insurance Bill is likely to affect fund mobilisation plans of insurance companies. Although the insurance regulator has issued guidelines for initial public offers by insurance companies, with losses it will not be easy to use this route. So, the companies are waiting eagerly for the enactment of the Bill. The Bill proposes to increase FDI limit from 26 to 49 per cent.
Meanwhile, the only solace for the Finance Minister could be the Direct Taxes Code (DTC) Bill. The committee has indicated the tabling of the report in the forthcoming session. This would enable passage and implementation of the new code from April 1, 2012.
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