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New Delhi, July 2: The economic survey today sought radical reforms to make banks stronger.

Some of the suggestions include removing the 10 per cent cap on voting rights of foreign investors, allowing greater entry of foreign banks and increasing equity sale in PSU banks.

The survey proposed that foreign investment in banks be raised in a phased manner, the ban on commodity futures lifted and high net worth individuals allowed to invest directly in the capital markets.

“(Expedite) passage of the Banking Regulations (Amendment) Bill 2005,” said the survey tabled in Parliament today.

The bill aims to remove the 10 per cent cap on voting rights of foreign shareholders in private banks. The Left parties had opposed this rule tweak as it might lead to takeovers by foreign entities.

Besides, the bill will lend greater flexibility to banks in managing their liquidity. It will bring in liberal investment norms and give the RBI more powers such as the right to supersede a bank’s board, said analysts.

The survey proposed to allow “public to hold greater equity in public sector banks within the policy of maintaining social control of management”. Small savings rates should be linked to yields on government bonds or bank deposit rates of similar maturity, the survey said.

Insurance FDI

The survey asked the government to increase foreign direct investment in insurance from 26 per cent to 49 per cent and sought 100 per cent foreign equity for a special category of insurance companies. “Consider allowing 100 per cent foreign equity in insurance companies that provide all types of insurance to rural residents and for all agriculture-related activities, including agro-processing,” the survey said