investment cap from 26% to 49%. FE had earlier reported that a consensus formula being worked out in this regard could be to retain the foreign direct investment limit at 26% and allow foreign institutional investors to take up 23% on top of it.
The Banking Laws (Amendment) Bill among other things seeks to give the Reserve Bank of India the power to supersede bank boards, a precondition set by the central bank for issuing new bank licences. The passing of the Bill would also encourage domestic and foreign private investors because the voting rights of shareholders of private banks is proposed to be hiked to 26% from 10% and that in the case of nationalised banks from 1% to 10%. The proposed larger say in management is expected to spur private investment – domestic and foreign – in the Indian banking industry.
Renewed hopes that the banking Bill could be passed in the current session saw a surge in the stocks of non-banking financial companies that are tipped to be among the new bank licensees – L&T Finance Holdings, Mahindra & Mahindra Financial Services and Reliance Capital – on Wednesday.
Amid the gloom, the industrial production data for October denoting an 8.2% annual growth, contrasting with negative growth reported in five out of the first seven months of the fiscal – brought some cheer. While Chidambaram said the data indicated “green shoots in the economy”, many analysts saw it as a sign that the economy has finally turned the corner. The surge in the index of industrial production (IIP) was, however, enabled by the Diwali spending spree and a low base – the index had contracted by 5% in October 2011 and, hence, many discounted it as an “optical illusion” and drew attention to the high volatility of the IIP data.
The finance minister also said the growth in direct tax receipts in April-November was satisfactory. While the gross direct tax collection grew a modest 7.14% during the period to Rs 3,25,696 crore, net receipts showed a 15.04% jump to Rs.2,70,731 crore, suggesting lesser refunds during the period from a year ago.