Govt makes big move on banking reforms; Bill brought in Parliament

As per the draft, anyone seeking to acquire 5% or more share capital of a banking company would need a nod from the banking regulator.

There are 20 nationalised and 22 private sector banks in the country.
The proposed amendments as regards the RBI's role would enhance the regulatory powers of the apex bank and increase the access of the nationalised banks to the capital market for expansion of the banking business, the draft said.

Besides, it also seeks to enable the banking companies to issue preference shares subject to regulatory guidelines of RBI and increase penalties and fines for violations.

It empowers the RBI to levy penal interest in case banks fail to maintain the minimum stipulated cash reserve ratio.

With regard to the Co-operative sector banks, the draft has suggested that RBI should have power to order a special audit of such banks as a means of increasing its supervision.

For deposit accounts which remain unclaimed for over 10 years, the Banking Regulations Amendment Bill 2011 also seeks to establish a Depositor Education and Awareness Fund which will take over such accounts.

The draft seeks to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and to make consequential amendments in certain other enactments.