Govt plans dozen new laws in financial sector

Consultation process is underway and the Bills will be finalised shortly

The finance ministry is planning a dozen legislation covering banks, financial institutions, non-performing assets and insurance companies.

Among these, a law to bring payment systems under the purview of the Reserve Bank of India and one on discounting of bills by small and medium enterprises are on the anvil.

The finance ministry is also deliberating on amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to strengthen the recovery of non-performing assets and also provide a stronger framework for the operation of asset reconstruction companies.

Finance ministry officials said the amendments were necessitated in the wake of the recent Supreme Court order and a report by PricewaterhouseCoopers, which had done a detailed study on non-performing assets and asset reconstruction companies.

Though no timeframe was given by the officials, they said the consultation process was underway and the Bills would be finalised shortly.

The government is also considering a proposal for amendments to the State Bank of India Act along with amendments to the law covering its subsidiaries. The proposal to amend this Act has been pending with the finance ministry for over three years and a decision is expected shortly.

Through a new Insurance Act, the government proposes to merge the Insurance Regulatory and Development Act with the Insurance Act and also provide more teeth to the regulator.

It was originally planned to relax the foreign investment cap from the present 26 per cent to 49 per cent in case of life and non-life companies.

With the Left parties opposed to a greater role for private insurance companies, a decision on the foreign investment provisions will need a fresh look.

A legislative framework to enable the proposed merger of IFCI Ltd with Punjab National Bank was also being explored by the finance ministry.

Some amendments to the Banking Regulation Act are also proposed in addition to those proposed through a Bill introduced in Parliament last winter. The Bill had proposed an end to the system of dual control over co-operative banks.

The government has to decide on lifting the 10 per cent voting right cap for foreign shareholders in private banks in the wake of recent objection by the Reserve Bank of India.

Strengthening Act

• Legislation covering banks, FIs, non-performing assets and insurance companies are on the cards
• Deliberation on amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to strengthen the recovery of non-performing assets