Banking Bill

• The Banking Laws (Amendment) Bill 2011 was introduced in order to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980.
• Paving way for foreign investments in the sector and establishment of new private banks and also to achieve greater financial inclusion.
  The Bill does not contain controversial clauses of allowing banks to trade in futures and keeping the sector outside the purview of Competition Commission as it was earlier proposed.
• The salient features of the Bill are as follows: 
• To enable banking companies to issue preference shares subject to regulatory guidelines by the RBI; 
• Voting rights of investors in private sector banks raised to 26 %, from 10 % which will boost foreign investments.
• Cap on voting rights of private investors in PSBs raised to 10%, from 1%  
• To create a Depositor Education and Awareness Fund by utilizing the inoperative deposit accounts; 
•  To provide prior approval of RBI for acquisition of 5% or more of shares or voting rights in a banking company by any person and empowering RBI to impose such conditions as it deems fit in this regard; 
•  To empower RBI to collect information and inspect associate enterprises of banking companies; 
• CCI to regulate mergers and acquisitions and will also have power to investigate and clear mergers and acquisitions in banking industry 
• RBI allowed to supersede boards of private sector banks. 
•  To provide for primary cooperative societies to carry on the business of banking only after obtaining a license from RBI; 
• To provide for special audit of cooperative banks at instance of RBI 
•  To enable the nationalized banks to raise capital through “bonus” and “rights” issue and also enable them to increase or decrease the authorized capital with approval from the Government and RBI without being limited by the ceiling of a maximum of Rs. 3000 crore under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980.
• The Bill would pave the way for new bank licenses by RBI resulting in opening of new banks and branches. This would not only help in achieving the goal of financial inclusion by providing more banking facilities but would also provide extra employment opportunities to the people at large in the banking sector.