Dilution of state ownership of India's banks 'not acceptable' | SupportBiz

Finance Forum

Dilution of state ownership of India's banks 'not acceptable'

Tighter regulation of banks given the unstable global economic scenario; processes that facilitate easier and cheaper loan disbursements to businesses; and no further dilution in government ownership structures are the ways forward for the banking sector in India, according to the largest and oldest trade union of bank employees.

Business transactions were affected with around one million employees of public sector banks staying away from work for two days beginning Wednesday to ‘protest against reforms that will give investors more clout in the tightly controlled sector,’ Reuters reported.

The Banking Laws Amendment Bill seeks to increase the limit on shareholders’ voting rights from just one percent to 10 percent at public-sector banks; and from 10 to 26 percent at private sector banks. “This is not acceptable,” said C. H.Venkatachalam, general secretary, All India Bank Employees Association.

Asia’s third biggest economy is experiencing a slowdown and reforms could attract more foreign investments into the banking sector, news reports said.

In the case of private banks, the Bill enables sharholders to move towards ownership of these banks. Banks, both state-owned and private, hold people’s money. Government policy and not shareholders’ diktat should govern the functioning of banks.

The Bill, if passed by Parliament, allows banks to take to the forward contracts business, that is, speculate more with people’s money. This should not be done, Venkatachalam said.

A third major issue with the Bill is that it facilitates easier mergers of banks without permission from the country’s competition commission. This again is unacceptable, Venkatachalam said.

The Indian government wants to debate the Banking Laws Amendment Bill in Parliament. The same was stalled Wednesday owing to a hue and cry in Parliament over the coal block allocation scam.