New banking bill omits provision to cut govt stake

The United Progressive Alliance (UPA) government on Tuesday introduced the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Bill 2005 in Lok Sabha but omitted an earlier amendment to reduce government's minimum stake in public sector banks to 33 per cent from the current 51 per cent.

The erstwhile National Democratic Alliance government had introduced banking companies acquisition and transfer of undertakings bill in Lok Sabha in 2000 with a provision to reduce government stake in public sector banks to 33 per cent. The bill had lapsed after the 13th Lok Sabha was dissolved in 2004.

"The proposed amendment mentioned...are broadly the same which were incorporated in the earlier bill. However, the amendment relating to reduction of prescribed minimum shareholding of the central government in nationalised banks from 51 per cent to 33 per cent as mentioned in the earlier bill has been omitted in the amendments proposed in the present bill," Finance Minister P. Chidambaram said.

The proposal to reduce minimum government stake in state-run banks was strongly opposed by the Left parties, crucial allies of the UPA government.

The new bill proposes to allow one to three shareholder directors on the board of nationalised banks on the basis of shares held. It also proposes to double the number of whole-time directors on nationalised banks' boards to four.