Financial sector hopes for reforms continuity

The financial sector hopes the pace of reforms will continue with the new government coming to power.

"We want continuity in the trajectory of the reform process, which has taken place over the last decade in the banking sector," said ABN Amro Bank chief executive officer Romesh Sobti.

Banks are equally seeking stability in the markets. "Reforms need to be continued and stability be maintained," said Standard Chartered Bank chief executive officer Christopher M Low.

"We hope the cap on voting rights is increased from the current 10 per cent and aligned to the shareholding pattern in a bank," said Low, voicing the views of most foreign bankers in the country.

"With the cap on voting rights, this brings about inconsistency with regards to mergers and acquisitions in the banking sector," said IndusInd Bank, managing director, Bhaskar Ghose.

While foreign bankers are hopeful that FDI in the banking sector will be relaxed, public sector bankers are not as optimistic. And they may not be off the mark as some government officials from the left parties said that they did not want foreign capital coming into "sensitive sectors like banks".

Public sector banks are keen that the government brings down its holding from the current 51 per cent to 33 per cent. Reduction in government holding would bring about professionalism and help banks shore up their capital.

However, a leading public sector bank chief acknowledged that the left parties may not wish to dilute the Centre's holding.

The bill to dilute the central government's stake to 33 per cent has been hanging fire for the last couple of years. Bankers also wish the 20 per cent cap on foreign investment in public sector bank shares is also relaxed.

Banks continue to push for deregulation in savings rate, hoping that this is market-driven as in the case of lending and deposit rates. Foreign banks further hope that the government opens up for opportunities for new products in the market like derivatives, said Sobti.

Foreign banks have already discounted their ability to set up subsidiaries and acquire other banking entities, taking it as part of the government's agenda simply to draft out the guidelines on this front.

On public sector banks however, there is a need to hasten the appointments of executive directors and chairmen and managing directors at various public sector banks.

Some of the banks have been headless for six months at a stretch and in some cases the chief of a financial institution held concurrent charge of another PSU bank.