The Telegraph
Thursday , December 20 , 2012
Since 1st March, 1999
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Kidwai for bank freedom

New Delhi, Dec. 19: Industry association Ficci wants banks to be free of government control.

“The government owning 70 per cent in banking has been one of the biggest constraints to its (the sector’s) growth in India,” Ficci’s first woman president and HSBC India head Naina Lal Kidwai told The Telegraph.

“India needs to give new banking licences,” Kidwai said a day after the Lok Sabha passed the banking bill, which could see the RBI grant licences to major Indian corporate entities.

The new Ficci chief is also in favour of allowing foreign banks to enter India as it will not only help to ramp up capital inflow but also promote niche banking and facilitate trade.

Further, consolidation is needed for bigger banks. “The sector needs to grow up,” she said.

Private groups such as the Tatas, the Birlas, Bajaj and Reliance as well as foreign banks can enter banking once the Rajya Sabha endorses the banking amendment bill.

The bill also raises the cap on voting rights of investors in private lenders to 26 per cent from 10 per cent. For public banks, the cap has been increased to 10 per cent from one per cent.

Kidwai, however, feels the process of inviting applications for new banks can take another 18 months.

According to Kidwai, India Inc wants the government to spell out ways to contain the burgeoning fiscal deficit in the upcoming budget.

“Unfortunately, subsidies on energy need to go but it should be done in such a way that people at the bottom of the pyramid are not drastically affected,” she said.

Diesel and cooking gas are hugely subsidised and with crude prices rising, there are fears that the subsidy bill will swell unless vigorous steps are taken to contain it.

Kidwai feels the Reserve Bank could cut rates in the first quarter of next year. “I expected the status quo (in yesterday’s monetary policy)... We do need to begin to offer signals to industry that interest rates are indeed on the way down so that it kickstarts investment.”

On trade between India and Pakistan, Kidwai said Ficci would push for setting up banks in both the countries to facilitate higher trade. She also hoped that Pakistan would grant the most-favoured nation status to India soon.

Ficci has been leading delegations to neighbouring countries — Pakistan and Bangladesh — to help the government to ease trade relations with them.

and has been working on track 2 diplomacy to get business chambers in these countries to lobby in favour of easier trade regimes in the region.

The recent moderation in inflation numbers, particularly non-food manufacturing at 4.5 percent in November 2012, a 32-month low, should provide the central bank comfort to begin to consider a rate cut early in the year 2013, as also imported inflation which reveals a decline to 6.5 percent in November 2012 (13.8 percent in November2011).”

She added that there are obviously concerns around the fiscal itself, which RBI wants to see more than signals. “Even activity that ensures there is a containing of the fisc, at least at current levels if not an improvement, are the things which the Reserve Bank rightly looks at. We do need to begin to offer signals to industry that interest rates are indeed on the way down so that it kick-starts investment.”