Finmin urges corporate affairs ministry to notify to keep ailing banks, insurers out of CCI.

NEW DELHI: The finance ministry has urged the corporate affairs ministry to notify that ailing banks and insurance companies will not come under the purview of the Competition Commission, a step that can help speed up issuance of new banking licences.

In a letter to the corporate affairs ministry, financial services secretary DK Mittal has requested immediate notification to this effect since banking regulation amendment bill and competition bill are yet to be passed by Parliament.

P Chidambaram had recently said that he had written to the Reserve Bank to initiate the process of issuing guidelines and start accepting applications for new banking licences in anticipation of the amendment in the banking regulation law.

But just a day later, RBI Governor D Subbarao responded by saying that the central bankBSE -0.80 % could not do so without fulfilling the enabling conditions for issuing new licences.

The finance ministry is of the view that the RBI can come out with final guidelines and start accepting applications before the amendment bill is passed. The ministry is also in discussions with the law and corporate affairs ministries over the powers that be granted to the RBI under the current regulations so that its basic demand of supervision over financial institutions are fulfilled.

"They had asked for a few enabling clauses. We believe that they have enough powers as of now to start with the process. We are coordinating with other arms of the government to facilitate what can be done," said a finance ministry official, who did not wish to be named.

The RBI had agreed after a long tussle that M&As in the banking sector would come under the purview of the anti-competition watchdog but insisted that forced mergers be kept out.

The Banking Amendment Bill seeks to give the RBI the power to supersede bank boards and also inspect other arms of banks such as mutual funds and insurance to ensure that their operations do not pose any systemic risk to the lenders.

It will take about nine months to issue the first banking licence if the bill is passed in the winter session of Parliament, the RBI governor had indicated.


Source : economictimes.indiatimes.com