Budget 2005: Banking Regulation Act to be amended

Chidambaram proposed legislative changes to remove limits on Statutory Liquidity Ratio and Cash Reserve Ratio.

In a measure to boost banking sector reforms, Finance Minister P Chidambaram on Monday proposed legislative changes to remove limits on Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

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Announcing in the Budget, he said that lower and upper bound to the SLR will be removed by amending the Banking Regulation Act to give RBI more flexibility to prescribe prudential norms.

He also said the Reserve Bank of India Act will be amended to remove the limits of CRR to facilitate more flexible conduct of monetary policy and enable the Central bank lend or borrow securities by way of Repo, Reverse Repo or otherwise.

The Banking Regulation Act will also be amended to allow banks to issue preference shares so that it can be treated as regulatory capital under specified circumstances as per Bassle II norms.

He also said specific provisions would be made to enable consolidated supervision of banks and their subsidiaries by the RBI.