Government Expected to Push Banking Reforms Through Law Amendments in Upcoming Budget Session
The government plans to table key amendments to banking laws during the upcoming Budget session of Parliament beginning later this month, in a bid to push forward long-pending reforms in the banking sector. Sources familiar with the matter said amendments are being proposed to the Banking Regulation Act of 1949 as well as the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. If passed by both houses of Parliament, these changes would help facilitate strategic disinvestment of certain state-run banks as announced by the Finance Minister in the 2021 Budget.
Lowering the current cap on government ownership of public sector banks below the 51% limit is seen as critical to opening up these banks to much needed private capital. Amendments would also strengthen corporate governance norms and bolster investor protection frameworks for publicly listed banks. The legislative agenda for the winter session last year had included proposed changes to the three key banking laws, but the bills could not be introduced due to truncated sittings. Experts feel expediting the legal reforms is essential to realize the banking privatization program outlined by the government.
The upcoming session beginning July 22 will see presentation of the annual Budget on July 23 followed by passage of the Finance Bill by August 12, thereby providing a window to take these amendments through Parliament. Two large public sector lenders are understood to be shortlisted in the first phase of the disinvestment drive for the banking industry. With changes to the relevant Acts, the complex legal hurdles in the way of partially privatizing these institutions can be removed. Observers will watch closely if the key banking law amendments materialize during the session as planned.
