Friday, June 17, 2011

BANKING SECTOR REFORMS – Where the industry heading to?

Mr.Montek sing Ahluvalia, ,the  Planning Commission Deputy Chairman pitches for more financial sector reforms. He agreed with the view expressed in the OECD's latest Ind-ia economic survey that financial sector reforms should be continued.
'On the banking sector, the OECD's (Organisation for Economic Co- operation and Development)second India Economic Survey, which was released today, has recommended that the Government should reduce its stake in public sector banks to 33 per cent, as suggested by the Narasimham Committee report, to make them more dynamic. The report pointed out that the 2000 budget proposed such a measure but in the face of strong opposition from the unions it was not implemented.
“It is high time to push it through now and to go further by
completely selling smaller public sector banks in line with the Rajan Committee (2009) recommendations,” the OECD survey said. The recent performance of these banks suggests that in addition the Government should become passive shareholders and let private shareholders run these banks, the survey said. Reduction in the Government share should also apply to the State Bank of India, it added.
Public sector banks, with reduced Government holding, should no longer be governed by social objectives. The employees of the nationalised banks should have the same employment status as those in private banks.
Reducing the Government shareholding to one-third would be
insufficient. The corporate governance norms too have to be improved so that directors and chief executives are appointed by shareholders and not the Government. Also, restrictions on the voting rights of large shareholders need to be removed, so that ownership can equate with control, the Survey has said.
On the asset management industry, the OECD survey has suggested that the maximum expenses allowed for unit-linked policies should be aligned with those of the mutual fund sector.' 

Source - Business Line - 15th June 2011
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1 comment:

  1. First, Parliament will pass the banking regulation amendment act empowering voting rights to the size of their holdings and then disinvest its share in PSBs upto 67%. Perfect foil to handover the national riches and the starving millions to the corporate houses. Long Live Republic of India.