SHRI SANTOSH BAGRODIA (CONTD.): Today, I will give you a list of PSUs. At least, in 200 PSUs, the non-official Directors have not been appointed for years and years. Sir, after these amendments, the Bill will help them retain public sector character. Whatever amendments you make, I will strongly recommend that the public sector character should not be disturbed. As I have said about non-official Directors, please ensure that the same person does not come again and again. I would like to quote what the hon. Prime Minister has said in the inaugural address to mark the bi-centennial celebration of the State Bank of India. He said, "Deployment of credit must keep pace with changes in the structure of economy. Banking industry needs to keep itself to be able to assess and meet the credit needs of the economy." Then, Sir, I again quote him. He said, "Credit for agriculture and allied activities is not a single market. Provision of credit for hi-tech agriculture is no different from credit to industry." That mindset of bank officers has to be changed. They have to understand that we need to have hi-tech agriculture and that is possible only when credit is properly given for agriculture. What kind of NPA is there in agriculture? It is much lesser than any other sector. He also says, "Innovation and customer services are going to be key drivers of success in the future and the growth cannot be achieved without a strong, stable and an efficient financial system." You are trying to make an efficient financial system, which I appreciate. But agriculture has to be given proper importance. Mr. C. Rangarajan, the Chairman of Economic Advisory Council to Prime Minister, has called upon the banks to evolve appropriate strategies to enable Indian firms to access funds at competitive rates and meet the challenges from foreign banks besides fulfilling the credit requirements of marginal and sub-marginal farmers. How do you equip them to take the challenge from foreign banks? This is very important. Sir, the next point that I want to mention very quickly is ..(Interruptions)..

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Did you say the last point?

SHRI SANTOSH BAGRODIA: There are five or six points. But they are very small points. I am not going to elaborate them because the hon. Finance Minister is very smart; he knows more than what I said and ..(Interruptions)..

THE VICE-CHAIRMAN: He also knows what you are going to say.

SHRI SANTOSH BAGRODIA: I will be very quick because Ramdasji has already mentioned it and I support him. In 1997, Sir, there were 32,939 rural branches which fell to 32,227 in 2004. It means, in seven years it has come down; the rural branches have not gone up. How do you help the small industries? How do you help the rural industries? How do you help the agriculture? I don't know what norms you can fix so that rural branches can grow in number instead of closing down. In metro regions, they have risen from 8390 branches to 9750 branches. Similarly, Sir, commercial banks appear to be leaving out rural areas and backward States. They concentrate only on rich States. That also has to be seen. In a federal country like ours, we cannot have branches only in the rich States. It is good news when Indian banks score above Asian peers in securing high returns including those in Japan, Singapore and Australia. Recent Moody Investors Services study points out the higher 20.4 per cent return on equity in Indian banks which reflects the improvement in asset quality, as indicated by the dwindling share of non-performing loans. (Contd. by 3o/KSK)


SHRI SANTOSH BAGRODIA (CONTD): Sir, similarly, the operative expenses of Indian banks have to go down. They are very high in comparison to other banks.

I would just like to draw the attention of the hon. Minister, through you, Sir, that bank credit to private sector as a ratio of GDP, in Argentina, it was 19 in 1970; 2001 and 2003, it was 156. Brazil - 47.8. It came to 34.6. China - 51.7. It came to 136.6. But, India, from 18.8, it came to 35.5. It is a steady growth, but not a jumping growth. Unless you have a jumping growth for the private sector, the economy will not come to 12 per cent or 10 per cent as you want.

One or two points which I want to make quickly which is a dear subject for me is 'withdrawal tax'. Hon. Minister imposed withdrawal tax. I do not know whether he could reach the goals that he wanted. Bankers are in great difficulty. It is very big problem for them to handle this tax, without any benefit to the Government. Sir, I hope in the next Budget, hon. Minister will withdraw it and let us know that how many people in the entire country, in lakhs and crores of accounts, have been traced because of the withdrawal tax. Could the hon. Minister handle even one or two or three such cases? At least, let us know the details of such cases and particularly with RTI, I am sure hon. Minister will have no objection sharing that information.

Sir, we have to have a level-playing field for our public sector banks along with private banks. For example, whatever laws you are making, I believe, or whatever directions RBI is giving, they are giving only for public sector banks. They are not including the private banks. If it is not true, I will give an example. Regarding SSI Sector and SME sector, hon. Minister has announced, I believe, last year or some time this year, 20 per cent growth compulsorily for public sector banks but not for the private sector. Why not private sector? Private sector is growing very fast in banking and they are....(Interruptions). I will take only two minutes. This is my pet subject. So, let the hon. Minister know. So, there should be a level-playing field. Let me tell you private sector banks are willing to do it. With the kind of interaction I have had with those bankers, they are willing to do it. But, why not involve them in the process of law. Let them do it voluntarily, but let them also know it is compulsory for them. In case of SSI credit, you know in 1998, the number of SSI accounts was 29.64 lakhs. By 2003, it came to 16.95 lakhs. It came down by nearly 50 per cent. But, I congratulate the hon. Minister that with his good intentions and I cannot give full credit to him; a little credit to the House, a little credit to our Committees, little credit to the public that with their outcry, but major credit to him that he made a policy by which now in 2005, we have 17.71 accounts. And, in 2006, already the accounts have increased to 18.86 lakhs, but the growth is only 16 per cent and 21.6 per cent, whereas the general growth of NBC is 28.61 and 34.5 per cent. I request him to make it compulsory for 40 per cent growth. Then only, we can come back to 1998 level when we had a percentage of 20.82. Otherwise, even with this growth, the total percentage will go down. I request the hon. Minister to kindly look into it.

And, the last point, Sir, is that Standing Committee has suggested that it has been proposed to address issues relating to 'fit and proper' status of shareholder Directors. Now, please define what is 'fit and proper'. That has not been defined anywhere. (continued by 3P)


SHRI SANTOSH BAGRODIA (CONTD.): I will request you to please define. With these words, I support the Bill wholeheartedly. My only request to you is to consider some of the suggestions which I have made, if you think they are in order. Thank you very much. (Ends)

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Mr. Bagrodia, you have one more minute left in case you want to speak. (Interruptions) Thank you. Now, Shri Tapan Kumar Sen.

SHRI TAPAN KUMAR SEN (WEST BENGAL): Sir, I rise to support...(Interruptions)

ִ֤ Ͼֻ: ֳ֬ , ״֮֙ ׻֋ ֯ ֮ ֟

ֳ֬: ֋, ֤ ֯ ׻֋ ...(־֮֬)

ִ֤ Ͼֻ: ָ, ״֮֙ , ֤ ִֵ օ ֮֮ߵ ӟ ...(־֮֬)

SHRI SANTOSH BAGRODIA: Sir, are you allowing him to speak?

THE VICE-CHAIRMAN: No, no. I am not allowing him to speak.

ִ֤ Ͼֻ: ֮֯ , ־ֲ ...(־֮֬) ӟ ...(־֮֬)

ֳ֬: ׻֋ ֮ ֯ ֤ ׻֋ ...(־֮֬)

SHRI TAPAN KUMAR SEN: Sir, I will request my colleague to allow me to speak. (Interruptions)

ִ֤ Ͼֻ: ָ, ״ִ ׾֢ סֵ ߓ ָ ׾֢ ӡ ߔ , ֟ ֻ ...(־֮֬) ߔ ־ֲ ...(־֮֬)

SHRI TAPAN KUMAR SEN: Sir, I am thankful to the hon. Minister and the UPA Government for not bringing forward the Bill in its original form as it was envisaged, formulated and introduced in 2000, making a provision for bringing down the Government's stake in banks to 33 per cent, to minority status and ensure privatisation. That would have been a great disservice to the economy and country's interests, and, it would have been difficult for us to support the Bill. Sir, I am thankful that such a retrograde provision has been dropped.

Secondly, Sir, notwithstanding the basic framework of the public sector status, the Bill aims at increasing the number of shareholders directors in the bank so as to provide for a more equitable representation on the Board of Directors. While welcoming this move, let me express some of my apprehensions -- I may be wrong -- which are although not entirely related to this Bill alone but have some bearing on the changing provision on non-Government shareholders directors in the banks' boards. Present position allows for representation of non-Government shareholder director on the basis of the shareholding pattern -- as I understand from the Bill -- and, in this process, a director from the corporate sector may well, even in individual capacity, find a place in the board of a bank. My question is: If in this process, one such non-Government director, who is at the same time a defaulting borrower or an NPA generator, finds a place in the same bank's board just by virtue of his shareholding, will it not be a case of conflict of interests, and, how do you propose to address it?

Now, there may be some provisions that banks do not lend to the directors but in our given system, there are a number of cases of many flagship group of companies, where one unit of that flagship company generates NPA and the other unit goes on enjoying the credit from the same bank, and, such kind of cases are plenty. So, I think, these issues require to be appropriately addressed while framing rules etc. I may kindly be enlightened as to how these will be addressed.

Thirdly, Sir, I think, Government also must take a serious view about this kind of possibility and stop further divestment in Government shares in the banks, and, frame appropriate rules to prevent such situations of conflict of interests. Sir, our banking system supports around 50 per cent of our GDP, which is way behind not only the developed countries, but also many of the developing countries. This kind of situation warrants wide expansion of the banking system and banking network to a vast left out section of our population who are mostly the victims of unscrupulous money-lending system. This requires that the banking system and network must invade the remotest rural segment to replace those unscrupulous money-lending system. This needs a reorientation of the policy relating to the interest rates and its lending policy. And, inter-alia, there is definitely a case of considering a differential rate regime applicable to different segments of the economy, different stakeholders in the economy -- large-scale sectors, small-scale and tiny sectors, agriculture and other rural occupations.

(Contd. by sk-3q)


SHRI TAPAN KUMAR SEN (CONTD.): I don't know exactly, I am not very confident, how does it sound technically viable, particularly, when stalwarts like Dr. Jalan is sitting before me. But, I am just expressing myself. I don't know what are the technical difficulties in it, for this kind of a differential interest rate regime. But, as I understand, treating different segments of people, having different economic status, having different strength, in a different manner, is the best way of ensuring equity. And, I think, that is also the role of the Government when they talk about aam aadmi oriented growth. So, how these two things will fit in together to have equity in these areas and also regarding the access to the financial sources, I think, should be seriously considered. In case of large-scale manufacturing service sector, the interest burden can be passed on to the product. But, in small-scale and tiny sector, as well as, the agricultural occupation, they don't have that much elbowroom between their cost and the ruling market price in an extremely competitive scenario. In this House itself, just before this debate began, the hon. Agriculture Minister has also admitted that even in the rural economy, the peasants don't take loan also for funding their capital expenditure, putting up pumps and other irrigations, etc., given the very low public investment in rural infrastructure. That is their situation. That creates a very deep indebtedness. So, I think, this warrants a very serious consideration on these aspects. I will request the hon. Finance Minister, if this is the background, if this is the need, simply market solutions cannot work. Also, only Basel 2 norm cannot deliver the goods. Something more is required to be done. How should we do it in this framework, I want to know. I request the hon. Finance Minister to throw some light on these areas as well. In this context, I would also request the Minister to review the proposal for omitting the provisions relating to the mandatory nomination of Directors by the RBI in the bank Boards. This is crucial in the sense that the RBI plays a crucial role in monitoring, supervising the functioning of the banks and re-tuning the same with the priorities, from time to time, in the country. So, this has assumed more importance, particularly, in the background of the observations made in the RBI Bulletin itself, regarding the banking sector missing the target on their priority sector lending, particularly, pertaining to the small-scale sector, tiny sector and agricultural sector. One year ago the Reserve Bank Bulletin made such concrete observation. So, in this respect, I request the Finance Minister to reconsider this.

Lastly, I will try to raise, let me say, a kind of selfish agenda, and selfish, in the sense, about the issues of workers and employees in the banking sector, the constituency which I personally represent. (Time-bell) Yesterday and day before yesterday I was closely watching the debate on this subject in Lok Sabha. I am glad that the hon. Finance Minister, while replying to the debate, just commented that we are proud of the management, unions and the employees of the banking sector for such an improved functioning. He, particularly, recognised their role. I don't know what feedback he is having from down below. At this moment, I understand, in our rationalised bank network, there is serious shortage of employees at different parts in different desks, particularly, in the front desks, where they are facing the customers. No doubt, technological improvement has reduced the requirement of such kind of manpower to that extent. But, because of aggressive VRS pursued in the banks, during the last more than five years or so, there is a real shortage, even after neutralising the impact of the technological development in the banking sector, in the banking activity.

(contd. by 3R/ysr)


SHRI TAPAN KUMAR SEN (CONTD.): So, I feel there is a serious need to have a re-look into that. More recruitment is required. I think, yesterday, while replying in the Lok Sabha, he also hinted to the extent that we need more people to strengthen our banking system. My only submission is that we need more people at all levels. Don't focus on a particular level. I think, from top to bottom, we need more people to operate our banks, to make our customers happy, to really make the public sector banks compete in a changing scenario, and, in this respect, I would request him to reconsider this.

There is serious resentment in the bank employees regarding the stoppage of compassionate employment. A new scheme has come up. But, prior to this scheme, there were backlogs. I request the hon. Finance Minister to give some kind consideration in that area also. I think this much selfish agenda I have a right to place before you. With this, I support the Bill. (Ends)

߸ י (ָ Ϥ) : ֳ֬ , ִ֕־֤ ֙ ָ ֮ ( Ԯ ӟָ) ׾֢ߵ ã ׾׬ (ӿ֮) ׾֬, 2006 ִ֣Ԯ ׻֋ ֛ ִ ָ֋ ״ֻ , ִ֣Ԯ , ֟ ׾֢ ӡ ֮ ֮ ֻ֮և ֙߿֮ ևԾ  ևԾ  Ùָ ָ ָ پ Ùָ פ ֻ֮և ֛ , ָ , ִ֤ ױ֋ә پ ָ ָ ֕ ־ ֯ ֵ, ֜ ָ ֕ ә , ׾ָ֯ߟ ֻ֮և ָ ֜ ֕ ִֵ , , ִִ Ùָ ֯߸ , ֯ ֜ ֕ ֵ ״ֻ ֵ, ֮ ߙ ָ ݵָ ֕ ״ֻօ ָ ݵָ ֕ ֵ ָ ָ ӓ 15 ״֮֙ 15 ״֮֙ ֤ ֻ, ָ ָ ֕ ִֵ ֯ ָ֯ , ֜ ߮ ֕ ֯ ֕ Ӥ ״ֻꅠ ֕ ֯ þֵ ֻ֮և , ևԾ  ִ ã֮ ֮ ױ֋ә پ , ׾֢ ӡ ֮

ָ ֻև , ֌ ֻև , ֻև ܵ ֜և ֮ ֲ ֙ , ָ ֻև ܵ ֜և և Ùָ ױ֋ә پ ׾ֿ ״֙י ָ ָ ױÛ כו֙ ו֋, ָ ָ ו֋, ָ ָ ֻߕ ֯ ֮ ִֵ ֻ֮և Ù ֮ פ ֮

ָ ֟, 1970 ֻ֮և֮ ֵ ֲ ™ߵ ֵ, ָ ֌ ׻֋ ֵ ֻ Ù ֻ ֯ ׻֋, ָ߲ ֤ ״ֻ ׾֬֋ ״ֻ , ׻֋ ֻ֮և֮ ֵօ ֕ ִ ֮ ֯ ? (3 ָ ָ)


߸ י (֟) : ӟ 32 ״ֻ ֵ , 32 , ֓ ״ֻ ָ ָ ֤ ֤õ , ָ ֻ ֋ ֓ ״ֻ ֋, ֈ 25 ״ֻ ֋օ

..׻ֵ : ״ֻօ

߸ י : ֻ ֟ ֵ, downtrodden ײ ֟ ֵ, ָ߲ ֟ ֵ, ֕ ? ֕ ָ߲ ֤ ֮ ״ֻ ָ߲ ֤ ֙ ֕ ָ ֵ - ֮ ָ כ ߅

..׻ֵ : י , ״֮֙

ֳ֬ ( פ ס־) : ָ ߻ ֯

..׻ֵ : י ָ֮ ׻֋ ֮֟ , ִ֤ Ͼֻ ֻ ֋ ֓ ״ֻ ֋, ֻ ֋ 25 ״ֻ ֋օ ֮ ִ֬ ֤ ӡ ֮ ֟ ֮ ו֮֟ և ו֮֟ , Ù؛ Ù֮ ׻י׿ֵ֮ ִ ָ ֈә , כ ֛ ־ֻ օ כ ֛ ָ ֟ ֋ - ֯ ֓ ִ ָ ..(־֮֬)..

߸ י : ִ ..(־֮֬).. ִ , ׻ ָ ..(־֮֬)..

..׻ֵ : Ùכ Ù֮ ָ ..(־֮֬)..

߸ י : ׾ֵ ָ օ..(־֮֬)..

..׻ֵ : ָ ֯ ֓ כ ֛ ״ֻ , , ֟ ֋ ֯ ֓ - ֯ ߕ ֻ߱և , ֯ ߻ ֯ - כ ֛ ֻ ֋օ ָ ֻ This is the state of a politician. (Interruptions)

SHRI C. RAMACHANDRAIAH: Sir, let us all improve the image of the politicians.

ָ : ָ, ߋ , ֟ ָ ָ ׻֋ և , ֕ ֻ þֵ ָ ֯ ֮֕ ׻֋ ֯ ָ ״ֻ ..׻ֵ ֟ ֟ ָ , ״ֻ, ֲ ׬ָ ֵ , ֵ ֮֮ߵ ׾֢ ӡ ֿ֮ ־ã ֮֕ - ָ ٻִֵ ׻֋ ֕ Ù ׯ׾ֻꕛ , Ù ׯ׾ֻꕛ ..(־֮֬)..

߸ י : ו֋ ֟ ֮ ..(־֮֬).. ׻ֵ ֮ ֤ פօ ׻ֵ ֟ , þֵ ..(־֮֬).. þֵ ֟ ֮ ֻ օ..(־֮֬)..

SHRI RAVI SHANKAR PRASAD: Sir, the Finance Minister must clarify. It is a very serious matter. (Interruptions) Why lawyers and politicians are being victimised by the foreign banks. (Interruptions)

SHRI AMAR SINGH: We are not untouchables. (Interruptions)

߸ י : ֟ ֻ ..(־֮֬)..

SHRI RAVI SHANKAR PRASAD: Honourable the Finance Minister, we are making a request to you. I also know that these foreign banks have made it a hidden policy that no credit card to politicians, no credit card to lawyers -- a lawyer of your former stature may be an exception. But, it is a serious matter. Please enquire into it as to why should the foreign banks have this kind of prejudice in India. It is very unfair. (Interruptions)

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Mr. Bhatia, please continue. (Interruptions) Please continue.

0 ֮ : ֳ֬ , ֮֮ פ ֟ ֓ , ֟և ß֮ ִ ֕֟ ֮

ָ :

0 ֮ : , ֮֕ֆ, ߻ ׻ ָ ָ ָ ™ , ָ Ӥ ? ß֮ ִ ֕֟ ֮

ָ : ײֻ ֮

0 ֮ : ָ ֓ ֟ פ ֳ ֤ ָ ֯ ֻ֟ ӓ , ֵԾ ָ ִ Ӥ ..(־֮֬).. ָ ָ ã , ֳ ֤ ֤õ ָ ״ֻ ֯ ֤ , ֯ ָ פ ֋..(־֮֬)..

ӟ ֛פ : ֯ ֙ ן ..(־֮֬)..

THE VICE-CHAIRMAN: Mr. Bhatia, please continue. (Interruptions)

0 ֮ : ֯ ִ֣Ԯ ? ..(־֮֬)..

֚ : ֙ ־ֻ ..(־֮֬).. ֟ ..(־֮֬)..

0 ֮ : ֯ ָ֮ ׾׳֮ ֤ ֤õ ..(־֮֬)..

(Followed by MKS/3t)


THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): I think, the hon. Minister must have taken note of it, and if he deems fit, he will clarify it during his reply.

߸ י : ևә ָ ֻ օ ֯ , advocate ֟ ־  ICICI privileged customer ٙױ ֯ ָ privileged customer ֟ ֻ advocate ֲ ָ ׻֋ apply ׌ ֵ, ֮ Advocate General ָ ֵ, ֮ ָ ָ ֵօ ָ ׻֋ ֮ ֲ ָ , ֮ ֯ advocate ָ advocate, politicians and police officers - ߮ ״ֻ֟ ֙ ֣ ֙ ߅ ױ ...(־֮֬)...

. ֮ : ִԮ ֙ ! ָ ӕ ִ , ָ כ ִ , ָ ֮ ֮ ָ ִ׮֟ ֤ , ߻ ׻ ָ ָ ™ , ִԮ ֟ Ӥ

߸ י : ߕֻ֮ ָ , ֲ ֯ ױÛ כו̙ , ֮֯ ױÛ כו̙ ׻ֵ privileged customer ֵ֮ ֕ ִֵ ֯ advocate ־ פ, ֻ , ֯ Advocate General of the state , ׻֋ ֯ օ ֯ ָָ , ׻֋ ֯ ״ֻ ֋օ ֯ ֵ ׾֤ ֯ ãן ֕

, ֯ ו֮֟ ݵ֮ ֮ , ֋, ױ׿֋ ֜֋Ӆ ָ ֟ ו ָ , ו ׻֋ ֻ֮և֮ ֵ, ֻ ߾ ? ֮֯ ָ߲ ׌ֵ ֕ ״ֻ ? ֕ ָ߲ ֮ ׻֋ ? ֱ ָ ߕ ׻֋ - ֛ ֤, ֜և ִ ׻֋, پ ׻֋ ֮ ֲ ֤ ִ ׻֋ , ו ָ Ϥ - ɳ - ָ ֤, ֕ã֮ , ֲ ־ֿ ָ ֮֯ ָ ֤״ֵ ֮ ֵֻ, ֯ ׯ֟ ֟ ן ״ֻ, ֤ ֮ ֟ ׻֋ ָ ߕ ׻֋ ָ߲ ֤ ֲ ־ã ֟ , ־ã ׻֋ ֮ פ ? ָ ֟ ꌙ , ꌙ , ݵ֮ ׻֋ ֬ , ָ֬ ֮֟ , ו ֮ ambit ֋ ו ָ ֮ ֮֮ ׿ֿ , ׾ֻ ָ , ֻ banker of the most downtrodden people  ָ߲ , ֕ , ׮֬Ԯ , ׻֟ , , ָ߲ ֛ ֤ , ֛ ֮֜ , ׯ֟ ֟ 韵 և ɳ

ֳ֬ ( פ ס־) : ߕ conclude.

߸ י : ֋, ֯ ֣ ֤ ֟ ו֋ ...(־֮֬)...

ֳ֬֠ : ֮ ֣ ֤ ֋, ֯ ִֵ ֚ ״֮֙ ..(־֮֬)...

߸ י : ״֮֙ ו֋ ....(־֮֬)...

ֳ֬ : ײֻ, ״֮֙ ֯ ו֋, ָ conclude ו֋

߸ י : ׾ֵ , ֟ , ָ ׾ָ֓ ־ֿ in sector private bankers , ָ , ׻֟ , ו֮ ܾ֮ ו֮ ̤֕, ֮, ו ֻ ߮-և ָ ֻ ֟ , ֕ , ֻ ֵ֟ ֵ ֕ã֮ ϣ , ֮֟ ִ֤ , , ֻ ָ ֮ פ Ӥ ֮ פ ֵ, ׸ָ ִ ֮ פ ֟ ߾ֵ֮֯Ԯ ֮ ֮ פ ? ֮ פ ָ ָ߲ ׌ ״ֻ? ָ ״ֻ? (3 /ֲ ָ ֿ:)


߸ י (֟) : ֕ ֲ Banking Regulations ֟ , Banking Sector , legal terminology ֯ Bankers , ֳ֮ Ӿ ֻ ׻֋, ׻֟ ׻֋, ֛ Bankers ֕ ־ֿ ֟ ׻֋ ֮ ֋, ֵԾ ֮ ׸׬ ֋ ׻֟, ָ߲ ֟ , ָ ؓ֟

ֳ֬ , ӟ ָ ݵ ֕ ߚ ָ , ָ ֳ֯ן , ֲ ֕ã֮ ִܵӡ ֮, ָ ײֻ introduce follow , פ-׮֤ ԤԮ פ , follow ־ , ִ֟ ִֵ , : ֮ ֟ ִ֯ ֮֯ ֮ ָ פ, ׻֋ ֯ ֮־֤ (ִ֯)

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Shri C. Ramachandraiah. You have just three minutes. But you can take five minutes. You have to conclude within five minutes.

SHRI C. RAMACHANDRAIAH (ANDHRA PRADESH): Sir, I won't make a speech. I will just seek some clarifications.

Thank you very much for giving this opportunity to support this Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Bill, 2006. Most of the Members were mentioning it as 2005, but the Bill which has been received from the Lok Sabha, after passing it, is 2006. I appreciate the Minister for bringing forward this Bill. It should have been brought a long time ago, but it has been delayed because of the dissolution of the Thirteenth Lok Sabha. Most of the amendments proposed in this Amendment Bill are largely administrative in nature. They are expected to improve the efficiency of the functioning of Banks, mainly, public sector banks. The Finance Minister was very cautious in maintaining the Government control by keeping 51 per cent equity. Everybody has got his own interpretation. It was originally planned at 33 per cent and subsequently it was put at 51 per cent. Some people might be thinking that it was done to satisfy somebody. But, as per the recommendations of the Narasimham Committee--I think the Government has accepted those recommendations--it should have been 33 per cent. However, it does not make much difference as long as it is under the control of the Government.

Sir, I want to make a few points with regard to the nomination of the RBI Director. If I remember correctly, most of the committees, especially, the Narasimham Committee and the Joint Parliamentary Committee, have recommended the deletion of the right of the RBI to nominate a Director because there is a conflict of interest between decision-making and regulation. I remember that in the Global Trust Bank case, when it was proposed to merge with the Bank with the Unit Trust of India, the decision had been taken by the Board of the UTI where a nominee of the RBI was present. I had the privilege to be a Member of the Joint Parliamentary Committee which inquired into it. When we asked the nominee of the RBI whether he was present when the decision was taken, he said, "I am present". Then we asked, "What was your reaction?". He said, "There was no reaction". Subsequently, it--I still remember because the hon. Member was the Governor of RBI then--went to the same gentleman for disposal. This particular decision, on merger with the Global Trust Bank had been taken by the UTI. It had gone to the RBI Deputy Governor who was the nominee of the RBI in the UTI which had taken the decision. Ultimately, we felt that there was a conflict of interest between regulation and decision-making. So, my question is: When the RBI is to regulate, why should the RBI be privy to the decisions of these institutions? That is my first point.

(Contd. by RG/3W)


SHRI C. RAMACHANDRAIAH (contd.): Originally, it was planned to delete it. The Finance Minister, left to him, will take very good decisions; I am quite confident of that. But, it is a coalition Government subject to so many pressures.

Secondly, with regard to the increase of full-time Directors from two to four, I welcome this measure. Since nationalisation, the public sector banks have grown in size and volume of business, and they have got multifarious activities. So, now, their volume has gone up, and the turnover of some banks is more than two crores. They have to look after various aspects of credit like sickness of borrowers, credit ratings of customers, human development, etc. So, umpteen numbers of functions have to be discharged by them. In addition to that, they are opening subsidiaries. So, I fully welcome this measure of increasing the full-time Directors from two to four. Sir, my point pertains Nominee Directors. I was privileged to ask for the attendance of Nominee Directors in banks. What is their percentage of attendance? What is their contribution? Honestly, I should admit that not even 10 per cent of the Nominee Directors are attending the Board meetings, and they have become a liability on the banks' management. No constructive suggestions are coming forth from these people. That is one angle. What I am trying to emphasise is that the Nominee Directors make no contribution, worth its name, for the improvement of the functioning of the banks. Secondly, I had been enquiring as to how many representatives from the farming community are there on the Boards of the banks. It is very minimal. Today I should thank you for increasing your level of lending to the farming community. You have made a commitment to the nation that you are going to increase, rather double, this lending in the next two years. Already one year has gone by. Sir, earlier, I used to see that most of the recruitments to these banks were given to Agricultural Graduates. But that is not the case now. I request the hon. Minister to take note of this...

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): You will have to conclude.

SHRI C. RAMACHANDRAIAH: I am not giving a lecture. I am pointing out certain deficiencies.

THE VICE-CHAIRMAN: But your time is over.

SHRI C. RAMACHANDRAIAH: Three to four minutes do not make any difference.

As for the strength of the Directors, it has been stipulated that if the percentage of shareholding is not more than 16 per cent, then, there will be one Director, and if it is between 16 and 32 per cent, then, it will be two. My point of clarification is this. Now, the number of Directors has to be regulated as per the provisions of this Amendment. Supposing, immediately after the passage of this Bill, when it will become an Act, the existing strength is more than the stipulation, what is the mode of retirement?

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): He will continue until retirement. I will explain that.

SHRI C. RAMACHANDRAIAH: My next point is regarding supersession. We claim that banks are functioning very well. There is, absolutely, no doubt about it. We are proud of the way our banks are functioning. And, we have been keeping the RBI nominees on the Board. There are Nominee Directors, that is, from the Ministry of Finance. There are sound banking practices. But, in spite of that, Mr. Minister, do you think that this particular provision of supersession, this particular clause, should be inserted here?

SHRI P. CHIDAMBARAM: It is an exceptional power.

SHRI C. RAMACHANDRAIAH: It is like article 356 in the Constitution.

(Continued by 3X)


SHRI C. RAMACHANDRAIAH (CONTD.): Sir, I read it in the Constituent Assembly speeches that if it is going to be invoked, then, it will be the black day for democracy. So, I have read it in the Constituent Assembly speeches. So, is there any necessity of it? Sir, supersession of a particular bank is not an ordinary thing. And, being so many directors of the Government and from the RBI in the Board, why should the bank's functioning be leading to such a horrible situation? So, it is true that if the functioning of a bank is detrimental to the interests of the depositors or the public, then this decision has to be invoked. But, it is very extreme decision. Sir, I request the hon. Minister to introduce some safeguards so that this provision should not be invoked unjudiciously.

Sir, this is pertaining to the approval and adoption of performance of shareholders. It is a very sound principle, which is in consonance with the Companies Act. They have introduced it here. But, in banks, Sir, I have got my own slight doubts. I request the hon. Minister to reply. In companies, it is a different thing. The accounts will be approved by the Companies Board of Directors. It will be presented to the shareholders' meeting in the AGM, and the AGM will approve and ratify it. But, the case in a bank is different. I think, the practical experience in future will tell whether the AGMs in which the banks' accounts are going to be ratified or approved, whether any acrimonious debates are there because it is not an ordinary thing. Most of the banks will be lending to so many industrial companies. So, so many NPAs will be there. So many provisions will be made to write off the NPAs. So, these are all the decisions which, I feel, in the AGM meetings they may not pass without any acrimony and other things. But, however, it is a sound corporate practice that has been introduced. Sir, I will complete in two minutes.

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Just please conclude now. Now, this is your concluding sentence.

SHRI C. RAMACHANDRAIAH: Sir, this is pertaining to opening of new branches. Sir, we came to know that a number of banks' applications for opening of banks branches and ATMs are pending with the RBI. I don't know the reasons for it because they don't assign the reasons for delaying it. There might be some errors of commission or omission on the part of the banks. Sir, the banks will have some thousands of branches, and they will be manned by so many personnel. Sir, one or two persons may indulge in some irregularities. That does not give a valid reason to the RBI to withhold the permission for giving permission for opening the new branches. Because in 2009 foreign banks are coming, and they are entering into the banking sector. Unless our banks consolidate and strengthen themselves, it is very difficult to have a competitive edge with them. I also request the hon. Minister to take into consideration this aspect.

Sir, there is one more issue which is pertaining to sick units. Sir, practically what is happening is this. The BIFR will give you a package. That package includes redemption of the loans to the financial institutions. Suppose, a particular industry borrows from, say, 20 institutions. If 18 institutions accept the package, and two institutions are not accepting it, he has to approach the court of law. And, it is taking inordinate delay by the courts to deliver the judgements. So, just because two institutions have not accepted this package, the revival of the unit which is employing more than 1000 employees is being delayed for some years. So, Sir, some safeguard has to be introduced here. After all, the amount that is liable to be paid to these two particular institutions is very, very small amount when compared to the overall package amount. Sir, two instances have come to my knowledge. They behave very arrogantly. They say, 'when 18 banks have accepted it, it is not mandatory on my part to accept that package.' So, the borrowers worry is, if I accept the conditions of these two institutions, I will have to make applicable the same conditions to the 18 banks, which he cannot afford to pay it, and the entire spirit of the package is being nullified.

(Contd. by kgg/3y)


SHRI C. RAMACHANDRAIAH (contd.): This aspect has to be taken into consideration. My final request is with regard to the shortage of staff, especially in the State Bank of India. I think, the hon. Minister should be aware of it. I request the Minister to initiate appropriate measures for recruiting the personnel in the banks so that the customers do not suffer.

Sir, with all these suggestions, I fully support this Bill. Thank you.


DR. BIMAL JALAN (NOMINATED): Thank you, Mr. Vice-Chairman. Sir, I was listening to the debate, and some very important points have been mentioned. You will be glad to know that I am not going to touch on any of the specific points.

With your permission, Mr. Vice-Chairman, Sir, can I just make three or four general points which are important in considering where do we stand in the banking sector? Sir, the first point--I think, this is something we have to recognise that banks have no money of their own to lend and that includes the Public Sector Banks, but they have the capital. But that capital is meant to ensure the protection of the depositor, it is not lent out. So, the critical point is, the intermediation by the banks or the financial institutions is to transfer one set of people's money to another set of people. This is a very critical point. And, that is why, the risk assessment of those who borrow is just as important as taking care of the safety of the depositor, because this is a very critical difference between the banking and the financial sector and any other productive economic sector that we deal. They do not have any money of their own. The so-called capital, that includes the Public Sector Banks is meant to provide capital adequacy, to protect the risks that if there is default, if there is a loss, then that capital is supposed to meet it; but, then, there is a subsidiary criterion that that capital has to be made up by the owner and that he cannot go below that capital adequacy. This is an international standard. So, this is an extremely important point which also brings me to the whole question of developing countries' and developed countries' regulation of the banks, functioning of the banks. The intermediary function of the banks is extremely much more difficult in a developing country like ours. This is not the case of the industrialised country or the developed country because there are conflicting interests. We heard about it. The conflicting interests have to be resolved or compromised on which views can be different.

For example, we had a very interesting debate on floods and on the farmers. Nobody can deny that banks have an important role to play. That kind of a situation does not arise abroad in the industrialised country or in another country where the decision the banks make is whom to give credit based on credit assessment and so on and so forth.

The issue of interest rate is equally important for us in the sense that what was said here is absolutely right that you have to have differential interest rates and the Government has already announced on it and this has been a long-standing policy that for lower amount of loan the interest rate is preferential than the large amount. And that has been announced.

The Public Sector Banks in the Indian context have a very special role to play and nobody can deny that and I do not want to go into the specifics also. But the reason why they have come to wherever we are now--economic sector, financial sector, etc.,-- is partly because of the leadership. The leadership is still with the Public Sector Banks. But, Sir, this is coming as a surprise to a number of people that for the Public Sector Banks the standards of capital adequacy, the standards of risk assessment, the risk management are the same as for any other serving banks. I am happy to inform you--and again I do it because I just happened to have this experience--that among the developing world, and that includes China, the Indian banking system is considered to be internationally one of the best, one of the most secured, one of the most development-oriented and one of the most fair and transparent one meeting all the international checks set by international institutions or anybody in terms of risk assessment. Why do I say so? It is important because if you issue a cheque from India anywhere in the world, it will be honoured; this is not true for 98 other countries.

(Contd. by kls/3z)


DR. BIMAL JALAN (CONTD): You will be surprised to know because that is countersigned by another bank somewhere else. So you can take that it is not an easy job, it is not easy to do this sort of thing, but I think what we have been doing in the past few years that we have reached a point where our banks have reached the kind of standards which we all want. Now, there are faults, there are problems, some of the issues were mentioned just now. Some banks have discriminatory policies which we must prevent, which we must resist. Some of the banks may not be doing the right thing for small farmers or small borrowers and they have to be corrected. But by and large, broadly speaking, the standards are the same and the standards for public sector, private sector, foreign banks, the standards and regulations, should be in conformity. And just with your permission, just two small points, one is corporate banks about which the Finance Minister said something and I think the reason you know. The public sector banks, you will be surprised to know, have now reduced their NPAs to almost half to what they used to be and that our NPAs now conform to, the old standard, that is, non-performing assets. So, something must have happened in terms of corporate banking. I will make this point to the Finance Minister that the idea of corporate governance is that we must -- that there has to be a distribution in management and the board of governors or the owners that the management decisions have to be taken by the management, practical decisions have to be taken by the management. You can set the policy, a broad policy, but the day-to-day policy determination in the banks is not the function or even the day-to-day practical decision, the management should not -- either by the Board or the Government which is the owner. The final analysis between the corporate governance and where we are today and we are this because of that that we have created a system whereby by any separation of power is a division of power. Finally, Sir, about this relationship between the Reserve Bank and the Government of India and here I speak not because I happened to work in the Reserve Bank. I also worked in the Government in many of the similar positions, including Banking Secretary and Finance Secretary, so, I think I can be unbiased in this whole thing of the Government and RBI relationship. Sir, the interesting thing about this particular relationship and this also distinguishes us from many of the developed countries is that what we do not require between the Government and the Reserve Bank is the so-called autonomy because you can't, in our country growth is first as important as price stability. A number of other countries what have legislated, that is price stability that the central bank has the only jurisdiction on prices and, therefore, it can set and also fix targets and so on of inflation because they are not as interested in growth and the idea is separation of power. So, the difficult decisions are taken by the central bank and the Government talks about something else, which was now employment, growth and something like that in the development. In our country the problem is that you can have the trade, you can have profit and these have to be reconciled, both at the fiscal area and the monetary area. It is good to have separation of power that the monetary policies are decided by the Reserve Bank of India and the fiscal policy is decided by the Government. But unless there is harmony, we would find that we cannot resolve the trade-off problems between growth, price stability, external challenges, external difficulties, foreign borrowings, exchange rate management as efficiently as we have been able to do. This I think is a tribute to the kind of relationship that we have built over the last 10, 15 or 20 years irrespective of which Governments have changed. But there has been a process of movement towards the system, where harmonious relationship with distinct responsibility from two segments, that is, RBI which is monetary policy and fiscal policy and the broad growth-oriented employment policy are decided by the Government. The pattern has been set and I can tell you, Sir, that India is today, the central bank, the Government, government-bank relationship in the developing world, at least, it is regarded as an achievement. We can at least be proud of that irrespective of all the other problems that we have. Thank you very much.

THE VICE-CHAIRMAN (SHRI DINESH TRIVEDI): Thank you, Dr. Jalan. Now it is almost five. We have one more speaker and hon. Minister's reply. So, I want to take the sense of the House. Half-an-Hour discussion is also listed. Should we finish this? I feel we can finish it because there is only one speaker left. ...(Interruptions)...

SHRI SANTOSH BAGRODIA: You do not promote this thing. ...(Interruptions)...

THE VICE-CHAIRMAN: I am just telling that I have to take the sense of the House. ...(Interruptions)...

SHRI SANTOSH BAGRODIA: If you advise and if the Minister requests, we will agree. ...(Interruptions)... If he tries to be difficult, we will not agree.

SHRI P. CHIDAMBARAM: Sir, I request. ...(Interruptions)...

THE VICE-CHAIRMAN: Is it the sense of the House that we finish this first?


THE VICE-CHAIRMAN: Good. Thank you very much.

SHRI SANTOSH BAGRODIA: After that we will take it up.

(Followed 4A)