New Delhi: In a major financial sector reform, the Government today (Dec 5, 2004) said it will allow 74 per cent foreign direct investment (FDI) in private banks as part of the roadmap to open up the sector by the end of this year.

Addressing the India Economic Summit, Finance Minister P Chidambaram also said the two other priority areas would be insurance and pension sectors.

"There is a discussion going on in the Government and a bill (to amend IRDA Act for hiking FDI cap in insurance) will be introduced early next year," he said.

In his Budget, Chidambaram had proposed hike in FDI cap in insurance from 26 to 49 per cent to enable foreign companies to infuse more capital in the Indian venture. The Finance Minister said the pension fund regulator would also be in place by the end of this year and the new pension system would be open for every subscriber.

On the banking sector reform, he said UPA (United Progressive Alliance) stands by the notification issued by the previous NDA (National Democratic Alliance) Government on March 5, to enable FDI in private banks to go up to 74 per cent.

"Foreign banks can acquire upto 74 per cent in Indian private banks. But there is no roadmap on this. We will unveil the roadmap," he said.

But he hastened to add that "PSU banks will give you (foreign banks) a run for your money."