The Telegraph
Tuesday , December 11 , 2012
Since 1st March, 1999
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Bank bill sparks row

New Delhi, Dec. 10: The Lok Sabha was adjourned today over the Banking Laws (Amendment) Bill, 2011, with the BJP opposed to bringing in a clause that allows banks to trade in commodity futures.

At present, banks can trade in shares, bonds and currencies, but Section 8 of the Banking Regulation Act prohibits them to trade in commodities.

Finance minister P. Chidambaram today proposed to amend Section 8 of the act, a move opposed by BJP leader Yashwant Sinha, who also heads Parliament’s standing committee on finance, on the grounds that the new proposal was not examined by the panel as it was not part of the original bill.

“New provisions have been added after the standing committee submitted its report. Now it has become a new law. Bring it again to the standing committee. In the original banking laws bill, the banks were not allowed to engage in speculative futures trading,” said Sinha.

The BJP, Left parties and Trinamul Congress insisted that the bill had been changed after the recommendations of the standing committee, and it needed to be scrutinised by the panel again. Chidambaram, however, said there was nothing wrong in introducing a new clause in the bill nor was this unprecedented.

“The cabinet has accepted most of the recommendations of the standing committee. Then a new clause has been added. When Yashwant Sinha was finance minister, dozens of times it happened. Now, because of one clause, they want it to go to the standing committee again. It’s unheard of,” Chidambaram told reporters after the House was adjourned for the day.

Section 8 of the act clearly states that no bank shall “directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it.”

However, banks are allowed to finance commodity business and provide fund and non-fund-based facilities to commodity traders to meet their working capital requirements. Banks also provide clearing and settlement services for commodities derivatives transactions.