Finance minister Pranab Mukherjee on Monday made a strong pitch for financial sector reforms promising to push ahead with major legislations including politically contentious insurance and pension legislations.
“The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. The UPA government is committed to take this process further,” Mukherjee said in his Budget speech.
A financial sector legislative reforms commission headed by Justice BN Srikrishna is streamlining all financial sector laws."It would rewrite and streamline the financial sector laws, rules and regulations and bring them in harmony with the requirements of a modern financial sector. The commission will complete its work in 24 months," he said.
Mukherjee said he proposed to move forward with various legislations including Insurance Laws (Amendment) Bill, 2008; The Life Insurance Corporation (Amendment) Bill, 2009, Banking Laws Amendment Bill, 2011, the revised Pension Fund Regulatory Development Authority Bill, Bill on Factoring and Assignment of Receivables, the State Bank of India (Subsidiary Banks Law) Amendment Bill.
The Insurance Amendment Bill seeks to enhance the cap on foreign direct investment (FDI) in private insurers to 49% from 26%. The Bill, as introduced in Parliament, does not split this between foreign portfolio investors (foreign institutional investors, or FIIs) and others, a government official familiar with the development said.
It also removes the need for Indian promoters to dilute a part of their holding 10 years after a firm starts operations, added the official, who didn’t want to be named.
The Communist parties, which supported the UPA government in the last term, have been against several insurance reforms including raising the ceiling on FDI to 49%.
Among other key provisions of the insurance bill is one that allows the four state-owned general insurance firms to raise more capital. The government of the day would have to take a policy call on dilution of stake when any of the four companies want to raise capital, the government official said.
The PFRDA Bill has also failed to see the light of day due to political opposition.
The pension sector regulator PFRDA has attracted opposition from Left front leaders against the equity investment option given to investors in the NPS.
The Left has traditionally taken a hard stand against the State’s money flowing into the capital market.