Bank reforms to be announced soon

Finance Minister P Chidambaram today said the government would announce a roadmap for banking sector reforms in the next week.

"We have lost about 7-10 days because of the tsunami. Add another 7-10 days, you will have the roadmap," Chidamabaram told reporters on the sidelines of a seminar on second-generation financial sector reforms. The government was expected to announce the roadmap by the end of December.

The roadmap is expected to provide greater clarity on foreign direct investment in private sector banks and ease the cap on voting rights for foreign investors in banks.

The matter has been debated at length and the finance ministry and the Reserve Bank of India appear to have ironed out their differences.

The minister sought the opinion of financial sector intermediaries on ways to improve the architecture of the financial sector, strengthen regulations and foster competition. "If I have a choice of answers, may be I will answer them on February 28 (in the Budget)," he said.

Chidambaram also said the government would shortly set up a regulator for the pension sector.

"We can have 8 per cent growth. The question is how to create a financial sector that can foster such growth," he said at the conference.

Stressing better risk management, he said: "With insurance and derivatives, risks are controlled, which increases the viability of projects and foster a higher rate of investment. This in turn leads to higher GDP growth."

Referring to the common minimum programme, he said there was a need to strengthen the financial sector regulators and run it professionally to foster competition.

Chidambaram said most of the earlier reforms had been carried out on a "trial and error" basis and he proposed to ask the regulatory agencies to adopt the best practices.

Commenting on the suggestion that the country could have a super regulator like Financial Services Authority of the UK, the minister said India was perhaps too vast a country to have a single regulator but it was necessary to strengthen the existing regulators and ensure that they work together.