The UPA government, shrugging aside corruption scandals and political criticism that has paralysed parliament for the better part of this year, has lined up a slew of financial sector legislations which it expects to be passed in the forthcoming winter session, in a move aimed at blunting widespread talk of a policy paralysis.
These include raising the foreign direct investment (FDI) limit in insurance firms from 26% to 49%, passing the Pension Fund Regulatory and Development Authority (PFRDA) Bill to pave the way for social security to millions of employees through efficient intermediation of long-term household savings, the Banking Laws (Amendment) Bill to align voting rights of foreign shareholders in banks to their equity holdings and the Microfinance Institution Bill to regulate small lenders.
“Most of these legislations are expected to be placed in Parliament for passage in the winter session,” a government source said.
The draft Microfinance Institution Bill, which was released for public debate in July, gives the Reserve Bank of India (RBI) sweeping powers to regulate lending rates and margins apart from fixing capital adequacy and other norms.
At the same time, the Bill provides for delegation of powers by the RBI to National Bank for Agriculture and Rural Development (NABARD).
The Banking Laws (Amendment) Bill 2011 and the PFRDA Bill were tabled in the Lok Sabha in March and the standing committee on finance is currently finalising its recommendations.
However, the PFRDA Bill steers clear of making any specific mention of a ceiling on foreign direct investment (FDI) in the sector. The government is expected to separately notify the FDI ceiling.
The Bill also allows for part investment in stock markets, although Left Front leaders are against the equity investment option given to investors in pension schemes.
The Left parties have traditionally taken a hard stand against the state’s money flowing into capital markets.
The Banking Laws (Amendment) Bill also seeks to empower the RBI with powers to the supersede a bank’s board to protect the interests of depositors. Finance minister Pranab Mukherjee in his budget speech had made a strong pitch for financial sector reforms, promising to push ahead with major legislations including politically contentious insurance and pension laws.