| Finance minister P. Chidambaram in New Delhi on Wednesday. Picture by Rajesh Kumar
New Delhi, May 17: The Lok Sabha today took up the controversial banking amendment bill that allows the Reserve Bank to specify separate criteria for buying shares and voting rights in a bank vis-'-vis foreign investors.
The amendment could increase voting rights of foreign investors by linking it to the shareholding pattern. There is a cap of 10 per cent on voting rights for foreign investors irrespective of the number of shares held in an Indian bank.
The Left, however, is loath to allow the changes. Meetings between Left leaders and finance minister P. Chidambaram and defence minister Pranab Mukherjee yesterday were futile.
The Left today said it would vote against the passage of those sections of the bill that relate to foreign shareholdings. Otherwise, the Left argued, FDI in private banks would cross the 74 per cent limit, and could even touch 100 per cent. In case of PSU banks it may even run up to 49 per cent, the Left added.
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.”
Gurudas Dasgupta, CPI deputy leader in the Lok Sabha and head of AIEBA, told The Telegraph, “We are against this move as it gives powers to the RBI to dictate the FDI to be allowed not only in private but also in state-run banks. We are 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.”
Though the limit of foreign investment in private banks is 74 per cent, individual voting rights is capped at 10 per cent. Besides, permission from the RBI is necessary for bulk purchase beyond 5 per cent, while the yearly creeping acquisition limit is 10 per cent.
The Left is opposed to higher FDI in banks as it “fears this will lead to domination of the financial markets by transnationals who would control one of the most important levers of the nation state.”