New Delhi, May 13: Finance minister P. Chidambaram brought before the Lower House an amendment bill that empowers the RBI to specify different criteria for acquisition of shares and voting rights in a bank.

This is a power that the Left is loath to delegate to the central bank as it reckons that this could create a backdoor entry for FDI in banking up to 100 per cent in the case of private banks and up to 49 per cent in the case of state-run banks.

An explanatory memorandum of the bill’s Clause 4, says it “confers the right upon the RBI to specify different criteria for acquisition of shares or voting rights in different percentages.”

“We are against this move as it gives powers to the RBI to dictate the FDI to be allowed not only in private banks but also in state-run banks. We are already opposed to the current provision which allows 74 per cent FDI in private banking. This will certainly formalise it, minus the restrictions which are in place today,” said Gurudas Dasgupta, CPI deputy leader in the Lok Sabha and head of the powerful bankers’ union, AIBEA.

Although foreign investment up to 74 per cent is allowed in private banks through an RBI notification, individual voting rights of overseas investors are capped at 10 per cent. Besides, approval of the central bank is needed for any acquisition beyond 5 per cent. A creeping acquisition limit of 10 per cent a year is also in place.

The Left is against opening up of FDI in banks as it fears this will lead to “domination of the financial markets by transnationals."

But multinational banks want the cap to be lifted and the creeping acquisition clause relaxed. The US and European governments would like to see India open up its FDI window for banking wider.

The bill could pass muster in its current form only if the BJP agrees to play ball with the Congress and helps clear it. Otherwise, it is likely to see the same fate as the pension reforms bill ? left in limbo because of strong Left opposition.

Besides the controversial Clause 4, the bill empowers RBI to change the statutory liquidity ratio, which is the percentage of money that banks have to keep with the central bank. It also gives the RBI the power to grant exemptions to banks to lend to its directors and companies or firms in which the directors are interested. Another bill was tabled to bring more flexibility to the cash reserve ratio.