Ailing banks, insurance firms to be kept out of CCI purview

The finance ministry has reportedly 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 D K Mittal has requested immediate notification to this effect since the banking regulation amendment bill and the competition bill are yet to be passed by Parliament, according to The Economic Times.

Finance minister P Chidambaram is clearly keen to kick-start the process of allowing private companies into the banking sector. On Thursday, he said that he had asked the Reserve Bank of India to initiate the process of issuing guidelines and start accepting applications for new banking licences, saying the amendment to the Banking Act could follow in due course.

But RBI governor Durruvi Subbarao seems to favour a more cautious approach. On Friday, he categorically said that no new banking licences would be issued unless the Act is amended and the central bank is given full regulatory powers over the new banks, including superseding the banks' board of thought necessary.

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," the ET report said quoting an unnamed finance ministry official named.