Although the two options are being carefully weighed now and a decision is expected only in a month or two, a general consensus has already been reached that either of the two would have to be amended.

The conflict arises from the fact that while section 7 of the Act allows free transferability and anonymity with regard to all share transfers--including the transfer of bank shares--the RBI norms as spelt out by a series of circulars issued by the central bank (section 35 A of the Banking Regulations Act empowers it to issue guidelines to banks as and when the need arises) stipulate otherwise.

The central bank norms lay down that whenever a transfer results in a change in the shareholding of an individual or group to 1 per cent or more of the paid-up capital of the bank, the bank management has to seek the acknowledgement of the RBI before the transfer is effected.

But the problem is that while the acknowledgement takes time coming, the Depositories Act provides for automatic transfer. Furthermore, information about individual transactions are sent only periodically by the National Securities Depository Limited (NSDL), the only depository operating currently, to companies and listed banks. In the interim, the information available to even the NSDL is in the form of consolidated data. Also,since de-materialisation is as yet partial, bank managements have to get details of the physical transactions from their registrars, as well, and combine the two in a cumbersome process to make the reporting exercise complete.

The rationale behind the RBI norms is prevention of unscrupulous takeovers of banks, which are receptacles of public funds. In fact, this is where the conflict of interest arises: while depositories and listed banks are eager to further the cause of dematerialisation because of the ease of transactions it affords to the investor as well, the RBI places the safety of the depositor first, perhaps all the more so because the market capitalisation of a bank's shares would typically be a fraction of what its deposits are. Incidentally, the RBI has also been furthering the cause of dematerialisation in other ways.

However, bankers contend that pegging this figure at 1 per cent for either the public sector banks with a low floating stock, or, for the bigger new private sector banks with their large equity base may not be necessary--although it could provide protection to some of the well-performing older private sector banks with their small equity.

An option thrown up by some new private sector banks some time ago was that the responsibility of reporting such transactions in a dematerialised environment be passed on to the acquirer, with the voting rights of all such acquirers kept pegged to a low ceiling till such time as the RBI gave its approval--for the sake of additional safety.