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The Finance Minister, Mr Pranab Mukherjee, has given shareholders something to smile about. On Tuesday he introduced a Bill in Parliament that will allow the promoters and shareholders of private banks to exercise voting rights in proportion to their shareholding. At present, this right is restricted to 10 per cent of the total voting rights of all the shareholders of a banking company.
The Government has also proposed to raise the ceiling on voting rights of shareholders of nationalised banks from one per cent to 10 per cent.
Bonus shares
The Banking Laws (amendment) Bill 2011 also seeks to explicitly allow nationalised banks to issue bonus shares and come up with rights issue to raise capital required for expansion of banking business. Banking companies will also be enabled to issue preference shares.
Responding to representations made by the Reserve Bank of India in respect of mergers of banking companies, the Bill seeks to exempt such mergers from the scrutiny of Competition Commission of India (CCI). Under the existing competition law, the CCI can take up to 210 days to give its ruling and this, the RBI has been arguing, is altogether too long when there is a bank crisis to be resolved.
Call for information
Bowing to another demand by the RBI made because some financial companies have become systemically important, the Bill also seeks to empower the RBI to call for information and returns from the associate enterprises of banking companies and also inspect them.
In a far-reaching move, another amendment will allow the RBI to supersede the board of directors of a banking company for a period not exceeding 12 months and appoint an administrator to manage the banking company during that said period.
Power will also be conferred upon the RBI to levy penal interest in case of non-maintenance of required cash reserve ratio. The Bill also enables the RBI to order a special audit of co-operative banks in public interest for a more effective supervision of co-operative banks.
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