FM calls for banking reforms to push financial inclusion

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Mumbai, Jun 26: Union finance minister P Chidambaram made a strong plea on Thursday to let the stalled banking reforms proceed in order to make financial inclusion a reality for India’s poor. Speaking at a top-notch gathering of India’s bankers, industry leaders and politicians at The Financial Express Best Banks Awards, the minister pitched for the passage of the Banking Regulation (Amendment) Bill, 2005 to make the voting rights of shareholders in private sector banks equal to their voting shares. Currently, voting rights of the shareholders are capped at 10%, irrespective of their actual holding.

“A bill is pending in Parliament on just this one clause,” Chidambaram said, adding the bill to amend the Banking Regulation Act of 1949 could go through Parliament within the tenure of this government if the national level bank unions and the bank managements were to hold deeper dialogue to remove misapprehensions. “What is missing is communication between the management (of banks) and the unions at the national level,” said Chidambaram.

The minister’s eloquent appeal in his speech made a deeply persuasive case as to why banking reforms was critical for India. He said the passage of the banking regulation bill will not impact the ownership pattern of public sector banks, as it was applicable only for private sector banks. Chidambaram said financial inclusion can be a reality in five years if banking reforms were pushed. Four years ago, the term “financial inclusion” was not popular.

“This government actually made it part of the code of conduct of every bank today,” he said.

Shekhar Gupta, Group CEO and Editor-in-Chief of The Express Group, in his opening remarks said reforms happen when politics demand them. The theme of financial inclusion ran through every programme of the evening. Vijay Kelkar, chairman of the Thirteenth Finance Commission, said reforms were needed to make financial inclusion possible. Kelkar quoted extensively from the finance minister’s book A View From The Outside to drive home the point to the large gathering of corporate India’s who’s who. Chidambaram presented Kelkar with the first copy of the Marathi translation of his book.

The high-profile panel discussion of the evening was also appropriately built on the theme of “Banking for the Billion.”

Sanjay Nayar CEO of Citibank India, UC Sarangi, CMD of Nabard, Chanda Kochhar, joint MD of ICICI Bank, KC Chakrabarty, CMD of PNB, Nilotpal Basu, central committee member of CPI(M), OP Bhatt, chairman of SBI and MS Sundara Rajan, Indian Bank, emphasised that the banking sector’s big movement forward was in the rural sector.