New Delhi: In a bold step towards reforming of the banking sector, government on August 13 introduced a Bill in Lok Sabha to give more teeth to Reserve Bank to regulate cooperatives, banks and FIs (Financial Institutions), besides facilitating mergers and acquisitions and mooting a Depositor Protection Fund.

The Banking Regulation (Amendment) and Miscellaneous Provisions Bill, introduced by the Finance Minister Jaswant Singh, proposes to hike the minimum capital base of foreign and domestic banks to Rs 100 crore, Local Area Banks to Rs 5 crore and cooperative societies to Rs 25 lakh.

The Bill provides for sweeping powers to RBI for removing the chairman of a cooperative bank while restricting directors of a cooperative or bank to assume the post in a banking company and supersede the board of a bank or cooperative.

The legislation will also facilitate amalgamation of banks with State Bank of India or its subsidiaries or with other banks.

It also provides for mergers of banks with non-banking finance companies.

The Bill empowers RBI to restrict acquisition of more than 5.0 per cent of shares by a bank and makes its approval mandatory.

It allows banking companies to issue irredeemable preference shares or redeemable preference shares as per the international practice.

The legislation paves the way for consequential amendments in the SBI Act and SBI (Subsidiary Banks) Act, Companies Act, State Financial Corporation Act, Regional Rural Banks Act, IFCI (Repeal) Act, IRB (Repeal) Act and UTI (Repeal) Act.

PTI