``We are not privatising nationalised banks by divesting our stake to 33 per cent, but are expanding the capital base by adding more investment in the sector,''Mr Patil said in his address at ``India Calling'' second overseas Indians' conference held by the Indian Merchants' Chamber on Saturday.

He said such steps were necessary as the financial sector was the heart of the economy and, ``it would be imminent to make it vibrant and competitve if the Indian economy has to leap forward''.

On the Reserve Bank of India's recent guidelines for licences to open new private sector banks, Mr Patil said the apex bank had simplified prodecures for application, as well as consideration for permitting the entry of new private banks.

Referring to the foreign banks operating in India, he said the government would soon fulfill its commitment to the World Trade Organisation (WT0) over issuance of 12 licences to the banks in the country every year.

``Forty-two foreign banks are in India with 185 branches. Few more are in the pipeline and we have already issued seven licences in this current fiscal,'' he added. The rural economy will not be neglected in the process of implementing the financial sector reforms, said the Union minister of state for finance Balasaheb Vikhe-Patil.

``We need to integrate our resources and technological expertise towards development of rural industries and agriculture," he observed.

India is a high-cost economy and there is an urgent need to move towards a competitive environment through the new economic policy, with greater transparency. In this context, he asked the non-resident Indians (NRIs) and global investors to make their investments in the core sector of Indian economy, in order to develop its infrastructure. Expressing concern over the slow progress of economic as well as social development, despite policy liberalisation, Mr Patil said, the government spends around Rs 35,000 crore annually for various schemes for social welfare, yet the progress is not visible.

On privatisation of public sector banks, the Minister said that the new banking law would allow the government to hold the controlling interest in these banks even at the equity holding of 21 per cent. Of the 22 board members in these banks, the majority 15 members would be nominated by the government, the main owner of the banks, he added.

Adressing the conference, State Bank of India chairman Janaki Ballav, Life Insurance Corporation chairman GN Bajpai and senior general manager, New India Assurance, KN Shenbagaraman, had assured all round banking and insurance support of their institutions for facilitating NRI investment in the country.