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ALL INDIA BANK EMPLOYEES’ ASSOCIATION

Central Office: “PRABHAT NIVAS” Regn. No.2037

Singapore Plaza, 164, Linghi Chetty Street, Chennai-600001

Phone: 2535 1522, 6543 1566 Fax: 4500 2191, 2535 8853

e mail ~ chv.aibea@gmail.com & aibeahq@gmail.com

Dear Comrades,

Banking Law Amendments

You are aware that the Banking Laws (Amendment) Bill, 2011 was introduced in

the Parliament in March, 2011 with the view to liberalise the various banking regulations

in favour of private corporate capital, both domestic and foreign. We have been fighting

against this Bill and there have been repeated strikes and agitations on this issue.

However, in the recent winter session of the Parliament, the Government pushed

through the Bill despite our strike action and protest by various political parties and

members of Parliament both in Lok Sabha as well as in Rajya Sabha. Of course,

certain clauses have been withdrawn or modified and Government could not do

everything as they wanted. This struggle by Bank Employees on this issue is an

important part of our history.

In this booklet we have reproduced some of the speeches of the MPs who

participated in the debate in the Parliament. We thank them for their support.

The reply to be debate by the Finance Minister is also furnished herein.

With greetings,

Yours Comradely,

C.H. VENKATACHALAM

GENERAL SECRETARY

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Enforcement of Security Interest and

Recovery of Debts Laws (Amendment) Bill

MPs who participated in the discussions on the Bill

in the Lok Sabha : 10-12-2012

1. Sri Dushyant Singh

2. Sri Sanjay Nirupam

3. Sri Shailendra Kumar

4. Prof. Saugta Roy

5. Sri Gorakhnath Pandey

6. Sri A Sampath

7. Sri Pinaki Misra

8. Sr Anandrao Adsul

9. Sri Gurudas Dasgupta

10. Dr Raghuvansh Prasad Singh

11. Sri Prasanta Kumar Majumdar

12. Sri Ajay Kumar

13. Sri Kaushalendra Kumar

14. Sri S Semmalai

15. Yashwant Sinha

Banking Laws (Amendment) Bill

MPs who participated in the discussions on the Bill

on 18-12-2012 in the Lok Sabha :

1. Shri Anurag Singh Thakur

2. Shri S.S. Ramasubbu

3. Shri Shailendra Kumar

4. Dr. Baliram

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5. Shri Jagdish Sharma

6. Prof. Saugata Roy

7. Shri Khagen Das

8. Shri Bhartrihari Mahtab

9. Shri Anandrao Adsul

10. Shri Prasanta Kumar Majumdar

11. Shri Gurudas Dasgupta

12. Shri S. Semmalai

13. Shri Prem Das Rai

14. Shri Ajay Kumar

15. Shri Badruddin Ajmal

MPs who participated in the discussions on these two Bills

in the Rajya Sabha Sabha : 20-12-2012

1. Shri Piyush Goyal

2. Dr. Bhalachandra Mungekar

3. Shri Tapan Sen

4. Shri Sekhendu Sekhar Roy

5. Shri S P Singh Beghal

6. Shri Ravishankar Prasad

7. Shri Naresh Agarwal

8. Shri Baishnab Parida

9. Shri D Raja

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CONTENTS

PAGE

NO.

ON ENFORCEMENT OF SECURITY INTEREST AND

RECOVERY OF DEBTS LAWS (AMENDMENT) BILL

1. COM GURUDAS DASGUPTA, CPI 6

2. PROF SAUGATA ROY, TMC 9

3. SHRI A. SAMPATH, CPI-M 12

4. SHRI PINAKI MISRA, BJD 15

5. SHRI ANANDRAO ADSUL, SHIV SENA 18

6. SHRI. S. SEMMALAI, AIADMK 20

7. SHRI YESHWANT SINHA, BJP 20

REPLY BY FINANCE MINISTER IN LOK SABHA 21

WALK OUT BY MPs AGAINST THE BILL 27

BANKING LAWS AMENDMENT BILL

1. COM GURUDAS DASGUPTA, CPI 29

2. SRI. SAUGATA ROY, TRINAMOOL CONGRESS 34

3. COM. KHAGEN DAS, CPI-M 37

4. SHRI S. SEMMALAI , AIADMK 39

5. SHRI PRASANTA KUMAR MAJUMDAR RSP 40

6. COM. D. RAJA, CPI 48

7. COM. SUKHENDU SEKHAR ROY, TRINAMOOL CONGRESS 50

8. SHRI N K SINGH, BIHAR 53

9. SHRI BAISHNAB PARIDA, BJD 57

10. COM TAPAN SEN, CPI-M 59

REPLY BY FINANCE MINISTER IN LOK SABHA 41

REPLY BY FINANCE MINISTER IN RAJYA SABHA 65

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Enforcement of Security Interest and

Recovery of Debts Laws (Amendment) Bill

LOK SABHA – 10-12-2012

SHRI GURUDAS DASGUPTA – CPI (GHATAL):

Mr. Deputy-Speaker, Sir, I must tender my unqualified apology because at the

beginning I did not realize the implications of this Bill. But on going into it, it appears that

it is a toothless superfluous Bill.

Sir, the ARC was set up many years back. That was done to realize the defaulted

sum, to realize the NPA and to clean artificially the balance sheet of the banks.

A number of times the Act was changed or amended. At the end of the day, let the

hon. Finance Minister tell this House the reason. It is not a question of numbers. You

can get the Bill passed. We can realize; that is not the issue.

Despite all the Bills that they had passed, despite all the amendments that they

had passed, and despite the all powerful Finance Minister, who is at the helm today and

more so, he is a lawyer, even then the fact remains that the NPA is increasing.

Today, my friend is saying that it is Rs.1,17,000 crore. No, it is nearly Rs.2,00,000

crore because the banks never disclose the NPA. The people who have stolen the

money are the criminals of this country but the law of contract is so sacrosanct that

they abide by that and they never let the country know who are the defaulters. Only suit

filed cases are made public. The NPA is increasing. I would like to tell the Members of

the Government and the Ruling Party as to why the NPA is increasing and who the

defaulters are. The defaulter is Kingfisher.

The firms like Kingfisher are the defaulters. The owner of Kingfisher has a free

access to the Government. But a small peasant, who might have defaulted the payment

of his bank loan because of his bad harvest, has no access even to the orderly of a

nationalized bank. This is the class society, I am telling you.

Kingfisher has an access and it is reported, whether it is right or wrong, I do not

know. The Government was using all its political clout to tell the banks to reconstruct

the liability and to give him further loan. I am told that the State Bank of India directly

said: “We will not give them a loan.” This is the situation.

Despite your powerful Act, which Parliament has supported, you have not been

able to take care of the increasing social malady of not paying back people’s money.

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Whose money is in the bank? The big landlords do not keep their money in the bank.

We keep our money in the bank. The common people keep their money in the bank.

People’s money are being misused and allowed to be defaulted, and the

Government has clearly and criminally defaulted in enforcing any law to bring to book

those who have stolen people’s money, and has totally failed.

This Act is again being amended. How is it going to help to realize the NPA?

Sir, the point is that the NPA undisclosed, the NPA unknown, the NPA covered up

by the Government and RBI is nearly Rs. 2,00,000 crore. Over and above, there is a

large NPA. I do not know how to describe it. Just see the linguistic fervour. Corporate

loan adjusted as ‘good’ loan. It is shown like that in the balance sheet. What is the

amount? It is more than Rs.1,00,000 crore?

If we take these categories, then what is the NPA? It is nearly Rs. 3 lakh crore.

Therefore, Sir, the point is that the Government has miserably failed despite all the

weapons they had armed them with, with the total support of the Parliament, to realise

the NPA and to reduce the NPA. Why is it so? The Government will never accept their

liability.

Sir, the paradox of the Indian Parliamentary System is that the Ministers and the

Government never speak out the reason of their failure. They will make a statement;

they will use their strength and number; and get the Bill passed. But I would like to know

from the Minister, why despite all the Bills that they had passed, all the laws that they

had enacted, all the weapons that they had in their armoury, they failed to reduce the

NPA. How is this going to help them?

What is the matter? ARC will become the shareholder of a sick company. That is

a new thing. Why should he become a shareholder? Can they change the policy? Can

they change the management? Even if they change the management, today the

corporates know the technology as to how to manoeuvre. Not only the Government

knows the manoeuvre to manage their number, the corporates also know the capacity

as to how to manage and manoeuvre with the loans.

Therefore, Sir, the point is that the country needs a strong law. I demand a special

court; I demand a special court and expeditious trial of all the willful defaulters of the

country, who have stolen our money and cheated the country. If you are serious, have

a special court. If you are serious, have a special court, special trial within an expeditious

time.

They are no less dangerous to the country than the terrorists. Yashwant Sinhaji,

may I draw your attention? You had been a Finance Minister as he is.

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What is the problem in having a special court? You try the terrorists. They are

terrorists because they had fired on you. Similarly, these defaulters are also terrorists

because they have fired on the viability of the Indian economic system.

We are overburdened with the bad debts; and the Government comes innocently

every time to make a law, to show how serious they are! But there is always a gap

between the cup and the lip.

Therefore, Sir, the criminality of the corporates, who did not pay their loan, cannot

be condoned. At the same time, the salinity of the Government in not being able enforce

a law also cannot be condoned. …

(Interruptions)

PROF. SAUGATA ROY (DUM DUM): Are you talking to Mr. Chidambaram or

Mr. Sinha?

SHRI GURUDAS DASGUPTA (GHATAL): I am talking about the Government.

Mr. Chidambaram is a very friend of mine. Why should I tell this to him?…

(Interruptions)

MR. CHAIRMAN (SHRI FRANCISCO COSME SARDINHA): Hon. Members, please

do not disturb him. He knows what to speak.

SHRI GURUDAS DASGUPTA (GHATAL): He believes that this law will be changed.

Therefore, he is optimistic. But I am saying the salinity of the Government, salinity of

the political system. Why should I separate a person from the collective responsibility?

Collectively, the Government is responsible.

Sir, I agree with my colleagues that it should be referred to the Standing Committee.

That is the simplest way. But at the same time, I say that the Minister of Finance owes

an explanation. I hope he begins his statement by this. He owes an explanation as to

why despite all the steps they have taken, the NPA is increasing. That is number one.

Number two, what prevents the Government from disclosing the names of the

defaulters? Number three, why will the Government not consider it? I do not want him

to give an assurance. The Government has tremendous corporate pressure on them,

I know. I know under whose pressure and what amount of pressure, the Ministries and

the Finance Minister have to work. I sympathise with them. There will be a pressure.

Therefore, I do not want an assurance. But let them say whether they are ready to

consider a special court, a special law, for an expeditious trial.

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Lastly, what prevents the Government from disclosing the names of the people

who have stolen our money? If we can disclose the name of a thief, why can we not

disclose the name of a person, who has stolen people’s money from the banks?

Let the Government show its goodwill.

I have seen this Government for many years. It is the eating that tastes the pudding.

Let us see what the Government wants to do. Therefore, innocence is a veil but

consequence is the truth. The Government is innocently saying, pass the Bill because

there is nothing in it. Why should we pass it? How is it going to help us? There is the

innocence that comes as a veil but it is the consequence which will prove the bona fide

of the Government who swears by aam admi.

Thank you.

(ends)

10.12.2012 LOK SABHA

PROF. SAUGATA ROY (DUM DUM): Sir, I rise to speak on the Enforcement of

Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011. It is a combined

law incorporating amendments to two Acts; The Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 and the Recovery of

Debt due to Banks and Financial Institutions Act, 1993.

Before I speak on Bills itself, I must remember that the nationalization of banks in

1969 was a major step taken by the then Prime Minister, Shrimati Indira Gandhi. For

the first time, bank deposits came in the hands of the public. And, for the first time

banks went into priority sector and agricultural lending. Further, in 1980 Shrimati Gandhi

nationalized six more banks taking the total to 20. Our banking system, our regulator

has stood the test of time. In 2008, when there was a global melt down, banks like the

Lehman Brothers of USA, the Citi Bank had to receive support from the American

Government to survive, none of our banks closed down. So, it is in the interest of all of

us that the banking system as such and the regulating system led by the Reserve

Bank of India remained strong and remained unaffected. It is in the interest of the

nation because in banks on the one hand the security of depositors is concerned and

on the other hand the loans to the poorer sections of people are ensured. I remember

when Shrimati Gandhi nationalized the banks there were processions in Delhi of the

cycle rickshaw pullers. For the first time, they were hopeful that they would get loans

from the banks for their needs. So, when we look at any banking law, we must keep

this basic purpose in mind. There is no doubt that in the 40 years or more since the

first nationalization –the State Bank was nationalized and 15 years before that the

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Imperial Bank was transformed into the State Bank – the banking system has expanded

vastly.

The total deposits and the loans have increased manifold. Our banks have to

compete in the global market place to survive. If I may mention, earlier the Government

had taken two very important steps. Firstly, the SARFAESI Act – as it is called – brought

in a new concept called the asset reconstruction company which would take over and

realise the secured assets of the banks.

Secondly, the Bank Recovery of Debts due to Banks and Financial Institutions

Act, 1993, was also a good step. Under this Act, the Debt Recovery Tribunals were set

up which would dispose of cases relating to bank loans and their non-realisation

expeditiously. So, I think both these were strong steps to strengthen the banking system

as a whole.

Now, the hon. Finance Minister has taken some more steps. In the present drive

of the Government towards the so called liberalisation and reforms, what did the

Government do? They did not only increase the FDI in multi-brand retail to 51 per cent

but the other aspects of the banks were also opened to Foreign Direct Investment. For

instance, the asset reconstruction companies have been allowed FDI up to 49 per

cent. I am not in favour of this. I do not understand why to reconstruct assets in India,

we need Foreign Direct Investment to come in.

With regret, I would say that once the Congress was known for Swedeshi. It

agitated against import of foreign cloths. Now it seems that the Congress is becoming

Videshi Congress. It feels that foreign investment is the panacea for all economic ills

facing the country. I hope that the Finance Minister who has been the Finance Minister

earlier also in the United Front regime in 1996 and then in the first part of UPA-I and has

extreme knowledge about this whole financial sector would explain the rationale behind

giving asset reconstruction companies 49 per cent.

The other thing that has been done by the 19th October Resolution - on which I

would speak in more details when we would discuss the Banking Bill - is that in private

sector, 74 per cent Foreign Direct Investment has been allowed. So, our deposits will

be controlled by foreign companies and you would be shocked to hear that the public

sector banks which Mrs. Gandhi had created by taking them away from the big

monopolies in the country, in their equity also, 20 per cent Foreign Direct Investment

has been allowed.

I think, these are retrograde steps and ought not have been done. If our banking

system can withstand the pressure of global melt down of 2008, then why in 2012 we

are exposing our banking system to Foreign Direct Investment where it will be subject

to global risks? We know what has happened to banks in the European zone? We

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know what happened to the banks in America? So, this is something which is not

desirable. I would like to request the hon. Finance Minister to reconsider his decision

about opening up our banking system to Foreign Direct Investment.

Sir, this Bill unfortunately was not referred to the Standing Committee on Finance

headed by Shri Yashwant Sinha. This was violative of the general convention that we

have adopted in the House. Otherwise, in a short debate in the House we are not able

to consider all aspects in an expert manner. Sir, you would be surprised to know that

the List of Business changes everyday. Earlier two Bills relating to education were

listed for discussion in the House. Suddenly the hon. Finance Minister must have thought

that he must pass the banking Bills quickly. The List of Business was changed and the

Banking Bill and this Bill was prioritised. We did not even get time to submit amendments

to these Bill. Many Members approached the Finance Minister and on their request he

postponed the discussion on the Banking (Companies) Bill so that some Members

could find time to submit their amendments. But we had no opportunity to submit

amendments on this Bill. You, as a guardian of the rights of the Members, please

ensure that in future all Bills are referred to the Standing Committee on Finance and

also that Members get adequate time to study and submit amendments to all Bills.

Sir, apart from this, the Bill has no other objectionable features. The Bill provides

for permission to Asset Reconstruction companies and securitisation companies to

convert loans of borrower companies into equity shares; it permits banks to purchase

immovable assets of borrower companies in lieu of their loan obligations; it includes

multi-State Cooperative banks within the definition of banks but if that will disturb the

concept of cooperative which are more liberal with distributing loans to poor people is

something that has to be considered by the hon. Finance Minister. Currently, banks

and financial institutions need to respond to representation from borrowers within 7

days, the Bill makes provision to increase this to 15 days. It enables banks or any

person to file a caveat if they are hurt by the DRT before granting a stay. It enables the

Central Government to require by notification the registration of all transactions of

securitisation or asset reconstruction, or security interest which is subsisting before

the creation of the Central Registry. The Bill provides the Central Government with the

power to direct in public interest that the provision of the SARFAESI may not apply, or

may apply with modification to a class … (Interruptions)

MR. DEPUTY-SPEAKER: Please conclude now.

PROF. SAUGATA ROY (DUM DUM): Sir, I feel that this Bill should still be sent to

the Standing Committee. Sir, finally, I was discussing the issue of Foreign Direct

Investment in the banking sector. Today, one very interesting news came to my attention.

This was in the first page of a newspaper which read ‘Walmart spent 25 million in last

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fours to lobby for India entry’. This is not only regarding FDI in multi-brand retail. Walmart

has officially submitted that it spent so much money in lobby with the US Senate, US

House of Representatives, US trade representatives and the US Department of State.

Why did it do so? It wants to enter the Indian retail market because the retail

market is estimated to be worth about $ 500 billion currently and is pegged to cross $

1 trillion mark by 2020. If Wal-Mart has spent so much money in lobbying to get into the

Indian market – something which we opposed tooth and nail in this House – I would like

to know whether the Wal-Mart has also spent money in lobbying with the Indian law

makers. If so, how much and what are the details? I do think that Lok Sabha should

discuss this issue of Wal-Mart trying to get into India through illegal means because we

are discussing FDI in Asset Reconstruction Companies. Why WalMart has spent so

much money is for all of us to think about.

With these words, I end my speech.

(ends)

SHRI A. SAMPATH (ATTINGAL): Mr. Deputy-Speaker, Sir, while speaking on the

Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011,

I would like to point out certain matters which have been brought to my notice by some

persons who are having some complaints regarding some authorities of the banks.

Sir, our country has entered an era where lakhs and lakhs of farmers are committing

suicide. Now, on the one part, it has become very difficult for the people to get a loan, to

avail of a loan either from a private bank or a nationalized bank and on the other part, if

there are any arrears and default of repayment of the loan, the attitude displayed by the

bank authorities towards the common people is something different from the attitude

displayed towards the large industrial houses.

First of all, I would like to request the hon. Minister, through you, Sir, to consider

our views that this Bill needs a thorough introspection, a detailed study by the Standing

Committee of Parliament concerned. The dispossession of dwelling houses as a part

of the immovable property happens as a part of the Act which is at present existing. A

party is dispossessed from the dwelling house with the assistance of the police as well

as the revenue authorities and the other paraphernalia as per the order of the Metropolitan

Magistrate Court or the Chief Judicial Magistrate Court. There have been instances

where the parties have committed suicide, even the whole family has committed suicide.

It is an unpardonable sin. I may be excused for using such a term that our law has put

upon such type of a burden, such type of a capital punishment on the citizens of India.

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As a part of the procedure of this existing Act, the procedure followed in the

Securitisation Act is that normally there are four numbers of notices published in the

newspapers – two numbers of possession notices and two numbers of sale notices.

Normally, what I understand from the various cases is that all these 10.12.2012 notices

put together including the advertisement in the newspapers come to around Rs. 1 lakh.

So, a person who has availed of a loan of Rs.10 lakh is put to an additional burden of

Rs. 1 lakh towards the advertisement charges and other notices. This also is credited

to the parties’ account.

So that he is able to pay back also. What happens is that, this particular person

is put from the frying pan to the burning pan. I am not going to make any political

speech; I don’t want to punch or pinch any of my friends from the Treasury Benches. I

genuinely6 feel that they also will be supporting me in certain matters.

There have been reports in various newspapers, especially in today’s newspapers,

regarding some report about NABARD. Some of the private companies are getting

loans for a very small rate of interest, 6.5 per cent of interest, with additional cash

refunds; while farmers are getting it for seven percent and above. Not only that, what is

the purpose of NABARD? I was one of the applicants who has written the examination

and attended the interview at the time when the NABARD constituted but I did not join

that job. … (Interruptions) I am more lucky because I have got the company of all these

learned friends, Sir. Our hon. Minister would be happy because I am also from the

same feather, even though I am much junior to him, and in the profession as lawyer.

What is the use of giving advertisements for Rs.37 crore by NABARD? Even a single

naya paisa need not be spent for advertisement by NABARD.

The prime purpose for which the NABARD was constituted was refinancing the

cooperative movement and State Governments and also to undertake certain flagship

programmes of the Government of India. If this is correct, I feel ashamed of it. Are our

banks misutilised by the top bureaucrats and executives for their luxury by spending

Rs.37 crore for advertisements and spending crores of rupees for the socalled

modifications of their offices? This has to be looked into very seriously and necessary

action should be taken by the Government of India. This cannot be tolerated.

Today, there are other reports also. The Government of India is now, I understand,

trying its best to bail out an Indian multi-national corporation from one of our neighbouring

countries. I am not going into any bilateral discussion or name any company; I am not

going to add any fire into bilateral relations that we have with that country but through

you, Sir, I want to invite the attention of the House to this.

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You see the amendments moved by the hon. Finance Minister, at Sl. No.6, Clause

13 – “6. Page 6, after line 15, insert –

(ac) after sub-section (5), the following sub-section shall be

inserted, namely:-

“(5A) After hearing of the application has commenced, it shall be continued from

day-to-day until the hearing is concluded: Provided that the Tribunal may grant

adjournments if sufficient cause is shown, but not such adjournment shall be granted

more than three times and where there are three or more parties, the total number of

such adjournments shall not exceed six:”

Sir, this is imposing something upon the Presiding Officer or a Tribunal. It is just

like handcuffing the Tribunal. It is performing a judicial function. It is not fair for this

Parliament to handcuff the Judiciary or a Tribunal or a quasi-judicial body.

MR. DEPUTY-SPEAKER: Please conclude.

SHRI A. SAMPATH (ATTINGAL): Sir, I am going to conclude. Sir, this is a very

serious matter. This concerns the life and death of people. … (Interruptions) Of course,

I understand the difficulties faced by the banks also because the banks say that as

equitable mortgage for the loan amount is usually created with any immovable property

and since agricultural properties are exempted from the purview of the Act, again

inordinate delay is caused for the realization of the amount due to banks. This is the

argument of the banks. I am not saying that this is the argument of the hon. Finance

Minister. But this is the argument of the banks. We have heard such arguments in the

DRTs also. Section 14 of the Act deals with the possession taken by the revenue

authorities or the CJM courts. So, either the revenue authorities or the CGM court is

empowered to take physical possession over the secured asset and hand it over to the

banks. Here, the banks say that since the revenue authorities are involved, there are

inordinate delays. This is their argument. Sir, I would like to mention one thing about

the jurisdiction of the DRT and the DRAT because the number of litigations are on the

rise. I am coming from the State of Kerala. We are having only one Bench of the DRT

there. I would like to make a request to the hon. Minister, through you, that for Kerala

and Lakshadweep, another Bench of the DRT should be considered and allowed; not

only that, we do not have a DRAT in Kerala. So, a DRAT should also be considered and

it should also be sanctioned because the number of cases are increasing and in the

coming days it will be even more. So, why should we put a burden upon the litigants on

the one hand and on the banks on the other? We want a speedy trial. But as you know,

15

justice hurried is justice buried. I hope our hon. Minister may also agree with me on this

that justice hurried is justice buried.

MR. DEPUTY-SPEAKER: Please conclude.

SHRI A. SAMPATH (ATTINGAL): Sir, I am going to conclude. Sir, the hon. Minister

was a very senior lawyer of the Supreme Court of India and his career was in flying

colours. So he will understand this better. I would like to humbly submit, through you,

that this is not a very good practice to put all these Bills in the House to ensure that they

get passed without any discussion or deliberation or evidence taking by the concerned

Standing Committee on Finance. So, once again, I would request that this Bill should

be sent to the Standing Committee on Finance for a thorough consideration, study and

deliberation and only after taking into consideration the evidence collected by the Standing

Committee on Finance and a thorough discussion, this Bill should be passed.

Thank you.

(ends)

SHRI PINAKI MISRA (PURI): Mr. Deputy-Speaker, Sir, I thank you for giving my

party, the Biju Janata Dal, an opportunity to speak on this very important piece of

legislation which is sought to be brought to the House by the hon. Finance Minister. Sir,

the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 has been

amended in 1995, in 2000 and then in 2004.

Similarly, the present Act, which is the other Act, which is sought to be amended,

which is the SARFAESI 2002 has also been amended in 2004. It was first brought

about in 2002 to give the 1993 Act more teeth and then had to be amended again

in 2004.

Despite all these repeated amendments, the Finance Minister in a reply to the

Question in the other House, on 23rd of August 2012, has admitted that the NPAs of all

nationalised banks in India stand at a staggering figure of Rs.1,23,462 crore. It is a

staggering figure. Out of this, the State Bank of India alone has an NPA of Rs.40,756

crore. This, Mr. Deputy-Speaker, Sir, I am sure the hon. Finance Minister will agree, is

the GDP of many small countries.

It raises some very serious questions as to the kind of accountability that our

public sector banks today offer the public. From the Chairman down to the Peon, it

ppears nobody is accountable once they are appointed. Let me tell you, Mr. Deputy-

Speaker and let me tell the hon. Finance Minister that I am one of the victims who has

16

had to actually remove my account from public sector bank because I was so disgusted

with their way of functioning. I moved to a private bank now. This is a personal

experience of mine.

Therefore, if this kind of lack of accountability continues in public sector banks, I

do not understand the point of another amendment being sought to be brought today.

The hon. Finance Minister would be advised to also remember that the year 2011-12

has seen the highest NPA in the last five years. This is how bad things have become.

This is prior to his taking over, I admit. But I do not know if after August when it was Rs.

1,23,000 crore, I think we must have added another Rs.5,000 crore to Rs. 7,000 crore

of NPAs over the last five months.

Plus the absolute lack of efficacy of both these pieces of legislation is clear from

the fact that 67,524 cases are pending before the Debt Recovery Tribunals. That is

how completely non-efficacious these pieces of legislation have become and this is

despite the fact that efforts have been made to dispose of these cases within 180

days, which is the mandate of the Government.

Now, the reason for this, may I say, Mr. Deputy-Speaker, and this is where I really

have to be one with the suggestions made by several Members of this House from all

shades of political colour, Shri Dushyant Singh, Shri Shailendra Kumar, Prof. Saugata

Roy, Shri A. Sampath, myself, and my leader, Shri Bhartruhari Mahtab, who made the

same offer and the same request. I do not know why the hon. Finance Minister feels

that this is really a way of derailing this.

This is not a way of derailing this because what he has brought by way of these

amendments is far too little and he will soon have to bring another amendment within

the next six months. So, out point was that he should take it to the Standing Committee

and a proper deliberation can take place, we could come up with a more holistic

amendment.

May I, as somebody who has practised some law on this side of the fence, tell the

hon. Finance Minister certain practical problems which today beset both these pieces

of legislation and which really could have been corrected by way of this if we would

have the chance to go to the Standing Committee and tell the Standing Committee that

this is what is required? But we have not had the opportunity and taking the opportunity

now, Mr. Deputy-Speaker, that you have given me in this House to ask the Finance

Minister again to consider from the other side of the fence as to what are the problems.

The banks will only give you piecemeal advice that little tinkering here, little tinkering

there and that is enough. But really what is the leitmotif? The fundamental of these

17

pieces of legislation is that the Act provides for setting up of Asset Reconstruction

Companies which are empowered to take possession of secured assets to the

borrower, including the right to transfer by way of lease, assignment or sale and realise

the secured asset. This is the bulwark of this. If this is the bulwark, I want to ask the

hon. Finance Minister why the current enactment does not permit inter se assignment

of debt by one ARP to another. The purposive intent of SARFAESI is to ensure the

expeditious recovery of debts. Therefore, if Section 5 of SARFAESI could be suitably

amended and there could be an inter se re-assignment of debt, this could be much

more expeditious and efficacious way of settling these issues.

Now, I come to the second issue. There has to be a codified structure by which

banks show complete transparency in their assignment of debts to ARCs. So far, this

has been done in an extremely cloak and dagger fashion, in a obfuscatory fashion, in

a fashion which does not at all give anybody, inspire anybody any confidence.

Thirdly, one of the difficulties being faced by the secured creditors under SARFAESI

Act is the determination of the priority of debts. I hope, the Finance Minister will pay

some attention to this because this is a very important aspect. I do not have his attention

now. I hope, at some point I will get his attention.… (Interruptions)

The provisions of SARFAESI Act for liquidation of debts have come into play but

there is a priority of claim to statutory authorities which is coming in the way repeatedly.

There is a complication because the State Sales Tax Act, as the hon. Finance Minister

knows, always have a provision in their various State enactments that there shall be a

first charge on the assets. Therefore, on realization of debts what happens is that the

secured creditors are left high and dry and the purpose of SARFAESI Act is not served.

Therefore, it would be very important that an amendment is brought about that

SARFAESI Act shall have overriding effect over all statutory dues including Sales Tax,

Income Tax, Central Excise so that other secured creditors will have priority in realization

of debts, of course, pro rata with workers, which is most important.… (Interruptions)

I read out your report that 67,000-odd cases are pending in DRTs. This does not

take into account the number of petitions that are pending in writ petitions. It is because,

I have personally had to appear in many matters in the High Court where writ jurisdiction

has been invoked. Therefore, some amendment has to be brought about by which writ

courts are injuncted from entering into these sort of litigations because this is supposed

to be a summary procedure under a summary enactment. There is problem about

uniformity of Stamp Act which must be uniform in all the States where SARFAESI Act is

there. Therefore an amendment needs to be brought about.

18

Now I come to a very important point. In respect of Section 18 C, which is a newprovision sought to be enacted today by amendment, why should there be a caveat inthis day and age? This is a typical nationalized bank mentality. This is the mentality ofthe nationalized banks which unfortunately the Finance Minister, I am surprised withhis kind of forward looking vision that he should fall prey to this that any person bywhom the caveat has been lodged shall serve notice of the caveat by registered post,acknowledgement due. In this day and age, who deals with registered post,acknowledgement due any more? With great respect, I mean, is this the manner inwhich we are going to function in the 21st Century? Where are we? There are e-mails, there are faxes, there are speed posts, and there are couriers. What kind ofenactment is this? It is basically intended to ensure that there will be no compliance.

Therefore I say with great respect, there are several other amendments I couldsuggest. Straightaway, I would be happy to suggest it. People like me would be happyto bow before the Standing Committee and suggest it to them.

But unfortunately the Finance Minister is keen that this be passed in its presentshape and form. We are unhappy with this. If the Finance Minister would reconsider,we would be very grateful. That is all.

Thank you very much.

(ends)

SHRI ANANDRAO ADSUL (AMRAVATI): Mr. Deputy-Speaker, Sir, thank you very

much for giving me an opportunity to speak on this Bill. I welcome some of the

amendments which are suggested by the Minister of Finance in the Securitization and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

First of all, the amendment suggested in the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 does not allow

securitization or reconstruction companies to convert the debt on the borrower company

into equity.

This amendment proposes to provide for the conversion of any part of the debt

into shares of a borrower company. Definitely it will help the banks and also the financial

institutions.

Secondly, the Bill proposes to include multi-State cooperative banks in the definition

of banks in the existing Act. I would request the hon. Finance Minister to pay his attention

to my suggestions. If you have added the multi-State cooperative banks in the definition

of banks, then, why have you not added the other cooperative banks into it? Multi-State

cooperative banks means the banks which have opened their branch or branches in

other States. They have registered under the Cooperative Societies Act of those

19

particular States and done the business in one or more than one States. If you are

allowing the multi-State cooperative banks; if they have opened their branches in other

States; then why not other cooperative banks can do that? They are also working

under the Banking Regulation Act since 1965. Therefore, it is my humble request to

you to do that.

I know the importance of this Act. Whenever, we are doing the business of banking

or financial institutions, there are two types of defaulters. One is the simple defaulter

and the other is wilful defaulter. In case of defaulter, some unavoidable circumstances

forced him not to pay the amount of the bank or financial institution. But there are some

defaulters who are deliberately not paying the amount that they have got from the bank

or institution. If this purpose is there, then, what the cooperative banking is doing?

They are doing the same business under the Banking Regulation Act. There is a

statutory audit and also an inspection from the Reserve Bank of India. Again, my

humble request to you is that to add all the cooperative banks in this Act as you have

added them in the Banking Regulation Act. I will be thankful to you for this thing. The

other amendment, which will also help to the banking industry and

financial institutions, is that banks are not empowered to accept any immovable

property in realisation of the claim against the defaulter borrower in the situation where

banks are unable to find a buyer for such assets. It is a fact. That is why you have

allowed, by way of amendment, to take into possession the immovable property to the

banking industry and the financial institutions.

My colleague has told regarding caveat. He is a lawyer of the Supreme Court of

India, that is why, I could not comment on it. The Central Government may exempt the

clause or clauses of the banks or the financial institutions from the provisions of this

Act on grounds of public interest. It is also a good amendment. It will help in the public

interest. Definitely there will be some relief to the public. There is another amendment

to be welcomed. It will propose to enable banks and financial institutions to enter into

settlement of compromise with the borrower. It also seeks to empower the Debts

Recovery Tribunal to pass an order acknowledging any such settlement or compromise.

It will also be helpful. If there is any chance for settlement before an order passes from

the tribunal or court, then, it will also help the bank.

In totality, definitely, good amendments are there. They will help to the banking

industry and financial institutions.

I convey my sincere thanks to you, Sir.

(ends)

20

SHRI S. SEMMALAI (SALEM): Sir, I am not going to make any speech, and I will

only be stating my Party’s stand on this matter.

Mr. Chairman, Sir, as far as this Bill is concerned, it should have been referred to

the Standing Committee on Finance. Though the Bill has been taken up for discussion,

it is not too late. At any time, the Bill could be referred to the Committee. So, my humble

request is that the hon. Chairman may be pleased to refer this Bill to the Standing

Committee on Finance. Thank you, Sir.

SHRI YASHWANT SINHA (HAZARIBAGH):

Thank you, Sir. I only wish to intervene in this debate and I am not going to speak

on the merits of the Bill. I am just going to reiterate the suggestion which has just been

made by the hon. Member. This Bill was introduced in the last Winter Session, and it is

coming to this House for consideration and passing exactly after one year. Even if it

had been referred to the Standing Committee on Finance, I am sure the Standing

Committee would have given its report and the Bill would have been then available for

consideration of the hon. Members of this House in all its aspects and ramifications

because the Standing Committees do apply their mind to the Bill.

I would even now earnestly appeal to the Government, Sir, in view of the fact that

it has taken one year to bring the Bill before the House, to refer it to the Standing

Committee on Finance, accept the sense of the House which has emerged after this

discussion, and let the Bill be considered, again, by this House after it has been

deliberated upon by the Standing Committee. This is the appeal that I wanted to make,

through you, to the Government. Thank you.

SHRI GURUDAS DASGUPTA (GHATAL): Sir, this is the appeal of the entire

Opposition. Let us see how far the Government responds to the opinion of the

Opposition. … (Interruptions)

PROF. SAUGATA ROY (DUM DUM): This is the opinion of our Party also.

MR. CHAIRMAN: Please sit down. Please do not disturb now. The hon. Minister on

his feet.

21

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM):

Mr. Chairman, this is an Act which was first passed in the year 2002. When Dr.

Raghuvansh Prasad Singh said that it has a very complicated name, all I can say is

that this name came in the year 2002 and, that is why, in common parlance, this is

referred to as SARFAESI Act because otherwise the name is a very long name.

Otherwise, the name is a very long name. It is like some South Indian names which

are very long. This Act has been amended once by Act 30 of 2004 and then in the

working of this Act, some difficulties were experienced. The Bill was drafted. The Bill

was introduced in the Lok Sabha on 12th December, 2011 by my distinguished

predecessor. Immediately, he wrote a letter to the Speaker requesting that the Bill be

taken up in the Winter Session which was on-going or in the Budget Session and it

should be passed before the end of the Financial Year. The hon. Speaker in her discretion

accepted the suggestion and, therefore, did not refer this Bill to the Standing Committee.

So, there is a history why this Bill did not go to the Standing Committee. And I agree

with hon. Shri Yashwant Sinha that if this request had not been made or if the Speaker

had turned down the request, this Bill would have gone to the Standing Committee and

perhaps, it will be reported by now. But now to tell me or to tell the House or tell you, Sir,

that is in December, 2012 had turned down the request, this Bill would have gone to the

Standing Committee and perhaps it will be reported by now. But now to tell me or tell

the House or tell you, Sir, that in December, 2012, when the Bill finally has found an

opportunity to be discussed in this House, let us refer it to the Standing Committee, I

submit, would defeat the very purpose for which this Bill was sought to be introduced in

December, 2011 with the request that if it be taken up in that Session and to be passed

in that very session, if not in the Budget Session.

I think when the objection was raised by hon. Member Prof. Saugata Roy, on the

instructions of the Speaker, a ruling has already been given. The Speaker in her

discretion has decided that the Bill will be discussed and passed in this House. So, my

respectful request is that while I do appreciate the views expressed by the hon. Members

that perhaps in 2011, this Bill could have been referred to the Standing Committee, my

respectful appeal is please do not press that argument now. We have got this Bill

finally listed for a debate in 2012 and it is necessary in the interests of the very banking

system that everybody was keen to protect that this Bill should be passed now. These

are purely technical amendments. And I am willing to explain each amendment to say

that no major changes are being brought about except to fill the gaps which have been

found in the working of the Act.

22

The second point is that this Bill does no harm to any farmer or to any poor lender

because by definition, these Bills do not apply to loans of less than Rs. 10 lakhs.

SARFAESI Act does not apply to a loan which is less than Rs. 10 lakhs. The Debt

Recovery Act does not apply to loans of less than Rs. 10 lakhs. And I will read Section

1 sub-section (4). It says that the provisions of this Act shall not apply where the

amount of debt due etc. is less than 10 lakh rupees. And in the case of SARFAESI Act

by virtue of section 31, the Act does not apply to any security interest created in

agricultural land. Therefore, these Acts really do not mean any harm to any poor farmer

or any poor borrower. These Acts are intended to recover large loans especially loans

from the Corporate Sector, the loans which have been borrowed and then there is

wilful default in paying these loans. So, there has been extensive consultation with

banks or with the RBI or with the DRT itself because the DRT is the one that deals with

these cases and therefore, after that, these amendments were drafted in the year 2011

and that is how, the Bill has been brought forward.

Now, Shri Adsul has asked the question. I did not want to interrupt him. He asked

a very valid question. Why is the multi-state cooperative bank notified and why are

other banks not notified? The answer is that they have been notified. Under Section

2(i)(c) “banks” means, such other banks which the Central Government may by

notification specify. By notification dated 28th January, 2003, Cooperative banks have

been notified and by notification dated 17th May, 2007, Regional Rural Banks have

been notified. So, all the banks have been notified.

I am very grateful to you for your support. This is the only issue on which you

wanted a clarification. I am happy to give the clarification. Yes, NPAs are a problem.

But NPAs in this country have been well under control when the economy was doing

well. Between 2006 and 2011, the NPAs have been controlled to below three per cent.

In 2006 March, it was 3.48 per cent gross NPA. Since then, for five years, it was below

three per cent.… (Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): May I ask the number?

SHRI P. CHIDAMBARAM: Let me finish.… (Interruptions)

MR. CHAIRMAN (SHRI FRANCISCO COSME SARDINHA): Nobody disturbed you

when you were speaking. … (Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): I am not disturbing. I am only asking.

Hon. Minister may be delighted to let us know the volume. It is a jugglery of words.…

(Interruptions)

23

SHRI P. CHIDAMBARAM: Let me finish. I heard everyone of the 13 Members. Let

me finish and then you can ask any question. It was 2.66 per cent, 2.39 per cent, 2.44

per cent, 2.5 per cent and 2.37 per cent. If the volume goes up, and if the percentage of

NPA remains the same, that means the total lending has gone up substantially. That is

why the percentage remains the same or roughly around two and a half per cent. The

two and a half per cent gross NPA in a developing country is not unusual. The two and

a half per cent gross NPA in a developing country is not unusual because there will be

a certain amount of defaulters in different sections – farmers and even self-help groups.

Among the best repaying groups, there is an NPA of between one per cent to two per

cent. Do you then say that the entire self-help group movement is a willful defaulter?

You do not say that. There will be an NPA of one or two per cent. If everybody pays the

loan, there will be no NPA. But I know of no country where everybody repays the loan.

And net NPAs were well under control, a little over one per cent, because the banks

were providing it and the regulator has been strict for many years. I do not take any

credit for this. Every successive Finance Minister can take credit for this because the

regulator has been very strict and a provision has been made to keep net NPAs only to

a little over of one per cent. What has happened in the last couple of years is that

because of the challenges to the economy, because of the stress in the economy,

several sectors are not doing well. And because several sectors are not doing well,

gross NPAs have indeed risen above three per cent. It is now about approximately 3.5

per cent. But even so, because we make provision, because the RBI is very strict in

requiring the banks to make provision, the net NPA is still only 1.62 per cent. The gross

NPAs are over three and a half per cent but the net NPA is only 1.62 per cent. The effort

is to ensure that sectors which are under stress are helped to get out of this difficult

time and units which are making money, we must recover the loans. Units which are

genuinely stressed must be helped. I did answer a question.

I said that there must be some hand-holding in a time of stress so that they all do

not become bankrupt or insolvent. They come out of the stress. We have to protect

employment; we have to protect jobs; and we have to protect manufacturing. They will

come out of the difficulty, once the economy recovers. We are going through a difficult

time. And it is this difficulty which is reflected in this rising gross NPAs. But let me tell

you, thanks to the RBI, thanks to the strict vigilance, thanks to the provisions made, the

net NPAs are well under control. There is no reason to think that our banking system is

in difficulty. In fact, many Members rightly complimented the banking system. When

over a thousand banks failed in the United States, not one bank in India failed.…

(Interruptions)

24

Because of good regulation, good governance, good provisioning and the growth

of the banking system, more people are depositing money and more people are able to

borrow money.

Banks are expanding. When banks expand into newer areas there would be some

difficulty in the early years. In fact in 2009-10 we opened 5,192 new branches; in

2010-11, 5,314 new branches; and in 2011-12, 6,503 new branches. We are opening

new branches at the rate of about 20 per day. Twenty branches per day is not easy to

open, 20 branches per day are being opened. Even so, there are many parts of India

which are un-banked and we must open many more branches.

It is our intention to open many more branches. Frankly, as Mr. Adsul rightly

pointed out, there is nothing controversial about any section. The sections are self-

explanatory. In fact nobody had any serious quarrel about any of the amendments, the

substance of the amendments. So, it is perhaps not necessary for me to detail each

amendment. There is nothing very controversial about any amendment. There were

some larger general issues raised. Who are the ARCs? There are 14 ARCs. One ARC

actually has 60 per cent of the business and this is an ARC, Arcil, promoted by the

public sector banks. So, the biggest ARC in the country is promoted by the public

sector banks and that has almost 60 per cent of the business. Other ARCs have now

come into being and they will of course get their share of business. But there are

14 ARCs.

Next question is: Is there a regulator for ARCs? Yes. The Reserve Bank of India is

the regulator for ARCs. They have to get a licence from the Reserve Bank of India and

the Act provides how the Reserve Bank will lay out guidelines to regulate the ARCs.

Mr. Sanjay Nirupam asked about a report on the working of the ARCs. Yes, there

was a Committee which looked into the working of the ARCs. They pointed out that

certain accounting methods followed by the ARCs were not in conformity with the

standards. That report has been accepted and Arcil’s accounts were recast in

accordance with the recommendations, and RBI has accepted the recast accounts.

There was some reference to adjournments, by Mr. Sampath. I think he is pleading

for poor lawyers who want more adjournments. In one breath he is saying that he is

pleading for the banks who have to recover and in the same breath he is pleading for

the defaulter. Pinaki said that 64,000 cases are pending. Why are 64,000 cases pending?

One reason is inadequate number of DRTs. I agree, more DRTs must be opened. We

will open more DRTs. That requires infrastructure, finding judges, etc., but we will open

more DRTs. I will look into your request that one more DRT should be opened in Kerala.

25

But cases are pending because the cases drag from weeks to months and from

months to years. Therefore, we are limiting the number of adjournments a case can

take. All these cases are where the security interest has been secured by a number of

documents. There is really nothing by way of evidence to be given. It is all documented

loans. Any number of documents are there to show that the person has taken the loan

and the person has defaulted. Therefore, we are putting a cap on the number of

adjournments a person can take.

How many adjournments should a case take? We said if there are ‘x’ number of

respondents, limit the adjournments to six. Otherwise, limit the adjournments to three.

What is wrong with that? Some day or the other these cases have to be decided. We

cannot go on giving adjournments for the sake of asking. Then, why 64,000, 640,000

cases will start pending. These cases can and should be disposed of in one or two

hearings because these are all perfectly documented cases. There is really no great

controversy about these cases. Therefore, I think the provision limiting the number of

adjournments is a wholesome provision. It does not deny the borrower the right of a

complete inquiry. Six adjournments, is that not enough to dispose of a case?

I would respectfully request my fellow-lawyer Member, Shri Sampath not to make

an issue as to why I am limiting the adjournments. In fact, we should limit the

adjournments so that the cases are disposed of. Then there was a question about

pendency, about which I said. SARFAESI Act has overriding effect. If you have looked

at section 35 – this was asked by Shri Pinaki Misra again – of the SARFAESI Act, it

does give this Act overriding effect over other laws. He said that we must take away

even the writ jurisdiction.

That is not possible. He knows better than I do. … (Interruptions)

MR. CHAIRMAN (SHRI FRANCISCO COSME SARDINHA): Please do not

disturb now.

SHRI P. CHIDAMBARAM: You cannot take away the writ jurisdiction. …

(Interruptions)

MR. CHAIRMAN: What is this? Nothing will go on record. Nothing will go on record,

except what the hon. Minister says.

(Interruptions) … (Not recorded)

SHRI P. CHIDAMBARAM: We cannot take away the jurisdiction of the High Court

or the Supreme Court, under article 226 and article 32; we can only take away the

powers of the civil court. The powers of the civil court can be restricted, but we cannot

26

restrict the powers of the others. … (Interruptions) Please listen to me. I know you are

an eminent lawyer, but please listen to me. … (Interruptions) I do not claim that at all.

… (Interruptions) We cannot restrict the powers of High Court and the Supreme Court.

Therefore, we have to leave the power under article 226 and article 32 in tact, but the

powers of the civil court have been overridden.

This Tribunal will have the powers to decide these cases.

There were some references to a couple of companies – individual cases. It may

not be proper to discuss any individual cases. But let me assure you that in no case,

will I allow any special favour to be shown. A particular case was mentioned, where

there was a huge NPA; the strictest action is being taken by the banks, in asking them

to put up the money upfront before any kind of accommodation can be given; no fresh

loans are being given. In fact, the Tax Department has taken severe action in attaching

those assets. So, no favours are being shown to any one, irrespective of whoever he

may be. The law is taking its course. Sir, as far as the merits of the amendments are

concerned, I respectfully submit this. Perhaps it is not necessary to discuss the merits

of the amendments. These amendments are purely amendments which have been

made to make the Act more active in its working, and to plug the loopholes that have

been discovered in the application of the Act. These amendments are intended to help

the banks; the banks have been fully consulted. These amendments have been intended

to help the DRTs to quicken the process; the DRTs have been fully consulted.

I would, therefore, request that these amendments be adopted. If, at the stage of

third reading, any hon. Member has any difficulty about any particular amendment, I

am willing to explain the amendment. But otherwise, these amendments are self-

explanatory. I would respectfully request the House to kindly pass these amendments.

… (Interruptions)

MR. CHAIRMAN: No. All the hon. Members cannot speak at the same time. Please

let him speak.

… (Interruptions)

27

WALK OUT IN PARLIAMENT IN PROTEST AGAINST THE BILL

SHRI YASHWANT SINHA (HAZARIBAGH): Sir, a very reasonable suggestion

has been made that the Bill be referred to the Standing Committee. It is not even

accepted; so, we walk out. … (Interruptions)

(At this stage, Shri Yashwant Sinha and some other hon. Members left the House.)

SHRI BASU DEB ACHARIA (BANKURA): What is the difficulty in referring the

Bill to the Standing Committee? … (Interruptions) We are also walking out.

(At this stage, Shri Basu Deb Acharia and some other hon. Members left the House.)

SHRI GURUDAS DASGUPTA (GHATAL): Sir, we are walking out in protest.

(At this stage, Shri Gurudas Dasgupta and some other hon. Members left the

House.)

MR. CHAIRMAN: The question is:

“That the Bill further to amend the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 and the Recovery of Debts Due

to Banks and Financial Institutions Act, 1993, be taken into consideration.”

The motion was adopted.

MR. CHAIRMAN: The Minister may now move that the Bill, as amended, be passed.

SHRI P. CHIDAMBARAM: I beg to move:

“That the Bill, as amended, be passed.”

MR. CHAIRMAN: Motion moved:

“That the Bill, as amended, be passed.”

PROF. SAUGATA ROY (DUM DUM): Sir, at this stage, I want to say something.

… (Interruptions)

MR. CHAIRMAN: Please do not disturb him. Let him say.

MR. CHAIRMAN: Hon. Member, I have allowed you . You please address the

Chair. … (Interruptions)

PROF. SAUGATA ROY (DUM DUM): Sir, I just want to make one point. Firstly,

we are not happy with the explanation which the Finance Minister gave for not referring

the Bill to the Standing Committee on Finance. Secondly, I did not hear any explanation

from him as to why they have decided to bring 49 per cent FDI in asset re-construction

companies. What is the need for raising the cap on FDI as far as asset re-construction

28

companies are concerned for reviving companies which have given sick or bad loans?

He has not explained that. I hope that he clarifies it or is it just to show that he is for

reform and for opening the door to FDI?

SHRI P. CHIDAMBARAM: Sir, as far as the first point is concerned, I have

already explained why a Bill introduced in 2011 by my distinguished predecessor with

the request that it need not be referred to the Standing Committee should not be referred

now after 12 months. I have given my explanation. Some are satisfied and some are

not but that is life. As far as FDI in ARCs is concerned, this is not being brought for the

present Bill. The Reserve Bank of India by a circular dated 11th of November, 2005,

has permitted FDI in equity in ARCs up to 49 per cent. This has been the FDI since

2005. However, you will be happy to know that the actual FDI in only one company is

about 31 per cent. In about nine of the companies, there is no FDI at all. In Arcil which

is the biggest company, there is only an FDI of 15 per cent and in other companies

there is a small amount of FDI.

Now the question is why do we need FDI. Nobody is imposing FDI. It is quite

possible that a re-construction company can be run without FDI but asset reconstruction

and securitization are extremely technical subjects. First of all, we did not have any re-

construction companies in India.

We do not have securitisation companies in India until this Act was passed. So,

we have no experience of securitisation and asset reconstruction. When the first one

was floated by public sector banks at the instance of the Government, perhaps they

thought that it may be useful to draw upon the experiences of other countries which

have successfully done asset reconstruction and securitisation. Therefore, a window

was opened for FDI and that window has been used only partially in a few companies.

It is quite possible that window will be closed. As we gain experience we may not

require FDI. But I think since asset reconstruction and securitisation are extremely

advanced instruments, extremely sophisticated instruments, perhaps the RBI felt at

that time that it is wise to allow a window for FDI. But as I said, the window has not been

exploited; the window has not been misused. In fact, many companies do not

have FDI.

MR. CHAIRMAN (SHRI FRANCISCO COSME SARDINHA): The question is:

“That the Bill, as amended, be passed.”

The motion was adopted.

29

ON BANKING LAWS (AMENDMENT) BILL, 2011

LOK SABHA ON 18-12-2012

SHRI GURUDAS DASGUPTA - CPI (GHATAL): Sir, I must submit that the

word “nexus” is an unparliamentary word. “Nexus” means something unethical. So,

friend, please do not use it.… (Interruptions) Anyway, I am not afraid of being supported

by Trinamool Congress. Let us make it frank.… (Interruptions)

MR. CHAIRMAN: Shri Gurudas Dasupta, please address the Chair.

SHRI GURUDAS DASGUPTA (GHATAL): Sir, I am addressing you looking this

side and that side but my eyes are on you!

The point is that on a common issue, there is no element of opportunism in having

convergent views. If there is a convergent view on this issue between the Left and the

Trinamool Congress, what is wrong? We have a convergent view with the BJP also.

On some occasions there are convergent views with Congress also. That is separate.

This is Parliament. We are free to have convergent and divergent views.… (Interruptions)

The point is Bill is not that innocent as it looks to be because the Bill is being

brought forward before the House to strengthen the banking system. That is what my

Hon. Friend and Mr. Finance Minister is saying. To strengthen – how? How banking is

going to be strengthened ? What is the status of banking today ? Sir, the NPA is

Rs.2.25 lakh crore, which is not disclosed. My Congress friends, please have a look at

the nationalisation that your leader did. They don’t disclose –Rs.2.25 lakh crore –

undisclosed. Banks are not in a position to invest in productive sector because your

economic policy has created recession; banks cannot advance any further in the

business. Therefore, they are investing in Government security, not global. It is your

creation. …

(Interruptions) No, it is not.

Your knowledge of economics is limited – may I tell you, humbly. …

SHRI GURUDAS DASGUPTA (GHATAL): This is the second phase of recession

in three years. In the first phase, we were unaffected. My friend does not know. In the

first phase, Indian economy was unaffected which means any convulsion in the

international market is not certain to affect India. That is the well-known truth. But today

India is affected. In the second phase of recession, India is affected. Therefore, what is

the magic? It is not international recession that has hit the country. Yes, it is hit. But we

have our own strength. But this time we are affected because the policy of liberalization

has failed; because GDP growth has slipped to 5.3 per cent; because investment has

30

come down; because savings have come down; because prices are increasing, having

an impact on the purchasing power of the people; because of the liberalization, there is

a contraction of economy; and contraction of economy is further strengthened because

this Government is restraining its expenditure.

I never wanted to raise it. It is a separate issue. We never discussed economic

situation. We discussed everything but not economic situation, which has predominantly

affected the entire nation of 120 crore. We have no time.

Parliament failed to discuss. It is a blame. At the same time, the Government is

running away from Parliament. They don’t come to Parliament to tell as to what is the

strategy to contain recessions and inflation. We are in dark. The Prime Minister is

making statement in FICCI; and my respected colleague, Mr. Chidambaram also spoke

of hard decisions. Therefore, this is a different situation not created by American

imperialism. It is created by Manmohan-Chidambaram economic model. …

(Interruptions) I cannot blame him. They are the respected members of the Government.

I cannot bring a person who is outside the Government; he is in Planning Commission.

I cannot name a bureaucrat. I cannot give him that respectability. Please, we leave it.

The point is, therefore, it is not because of the international recession. My friend

should take lesson by international record of development as available in the Internet.

Let him open the Internet. He will find it. … (Interruptions) Please do not provoke me. …

(Interruptions) Cuba is not in recession. You do not know. China is not in recession.

Sir, this Bill is contradictory. How? He has referred to Dr. Rangarajan Committee.

… (Interruptions) Sir, the Chairman of JPC is interrupting me. Is this parliamentary

decency? … (Interruptions)

SHRI P.C. CHACKO (THRISSUR): Sir, for the last 20 years he has been saying

the very same thing. … (Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): Sir, I would like to tell my friend that

liberalization was started by my friend Dr. Manmohan Singh when he was the Finance

Minister in 1991-92. How many years have passed? This new economic policy has

been implemented by the same Government and they have been in power for most of

the time since then. This policy has been continuing for the last 20 years. What is the

result? The result is, in International Hunger Index, India’s place is 57. That is the result.

The largest numbers of poor people are living in India. More than 40 per cent of the

people of our country are living below poverty line. … (Interruptions) West Bengal is a

part of India. It is not separate from India. … (Interruptions)

31

Sir, my learned friends do not know that the economic policy of the country is

developed in Delhi and it is not developed in Kolkata. Therefore, whatever Government

may be in power in Kolkata, they are bound to go by the economic policy pursued by

the Government of India. Do you want a rebellion to break the federal system? They are

bound by the common economic policy. That is the point.

Sir, I want to tell you as to why I do not support this Bill. On the one hand, they are

saying that there should be amalgamation. What does amalgamation mean?

There are 26 public sector banks. Amalgamation of banks will reduce the number

to 12 or 15. What does it mean? The number of banks will be reduced and by reducing

the number of banks, competition will be tinkered with? There will be an element of

growth of monopoly. One argument they are making is that amalgamation is to make

big banks. On the other hand, Mr. Chidambaram is pressurizing the Reserve Bank to

allow private companies to open new banks.

What is the dilemma? You want to reduce the number of banks. The statement of

the Reserve Bank Governor is on record and the Reserve Bank has said that if you do

not give us more supervisory power, we will not allow you to open new banks. What is

the contradiction? On the one hand, you want new private banks in the name of

competition and on the other hand, you want amalgamation of public sector banks.

This is one contradiction.

The second contradiction is capital requirement. Let the hon. friend coming from

Kerala, the great land of India, should know why we are sticking to the same position.

Let him know that the banking business does not depend on capital; banking business

depends on deposits.

SHRI GURUDAS DASGUPTA (GHATAL): Sir, we do not stand in the way of

legitimate transaction of the business of the House; legitimate underlined…

(Interruptions) legitimate transaction… (Interruptions) Yes, business transaction.

Business does not mean making profit. They might have misunderstood because

my friend always believes in terms of profit… (Interruptions)

SHRI NISHIKANT DUBEY (GODDA): Economics!

SHRI GURUDAS DASGUPTA (GHATAL): Not economics, he is a businessman…

(Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): Sir, therefore, the second point is that

they want amalgamation on the one hand and they want new banks on the other. What

32

is the meaning? They want Tatas to open new bank, they want Reliance to open new

bank, they want any other private company to open new bank and at the same time

they want to reduce the number of the public sector banks. It is a contradictory policy.

Sir, I warn the Government not to allow the private companies to open their banks.

We have seen how the banks run by the private companies indulge in irregularities,

money laundering in order to further the profit of their own company. We have seen

what Bank of Karad had done to help Harshad Mehta, Hiten Dalal and everybody.

MR. CHAIRMAN: Please conclude.

SHRI GURUDAS DASGUPTA (GHATAL): Therefore, please be cautious in giving

licences or in pressurizing Reserve Bank to give licences… (Interruptions) best word

is to pressurize because they are not agreeing. Instead of using their political clout to

pressurize the RBI, please be cautious what is going to happen if these private

companies, who are at the top, open new banks. World’s four top companies belong to

India. If they open banks what will happen? They will tinker because everybody is

interested in profit, I would like to draw the attention of Mr. Chacko. Everybody is interested

in profit.

Thirdly, with regard to regulator, the RBI, I have all respect for RBI. I have nothing

to say. But RBI of late has become a white elephant.

SHRI GURUDAS DASGUPTA (GHATAL): Sir, It is beyond their scope to regulate

the huge business run by the companies. I know, I was a member of the Joint

Parliamentary Committee in 1993-94. We indicted in our report the role of the Reserve

Bank. We suggested that Reserve Bank should be divided, but the Government did not

listen to us. After that Ketan Parekh development happened. Who was responsible?

The Reserve Bank of India.

SHRI GURUDAS DASGUPTA (GHATAL): Who is responsible for the NPA, which

is corroding into the vitals of the banking system? Is Reserve Bank strong enough to

control the banking system? Therefore, I would urge upon them to think of stronger

regulator; not only Reserve Bank but if they want really to expand.

Sir, the point before the country is access of the people to banking; only 40 per

cent of the people have access to banking and 60 per cent have no access to banking.

MR. CHAIRMAN: You have made your point. Please conclude now.

SHRI GURUDAS DASGUPTA (GHATAL): Sir, you go to the tribal areas, you go to

under developed areas, you go to farmers

33

Therefore, this Bank does not coincide with the national interest of the penetration

of the banking system.

At the same time, I shall say that this Bill is a step forward in the direction of further

liberalising the system. You will not be able to privatise the nationalised banks. That

political power you do not have. … (Interruptions)

MR. CHAIRMAN: Please conclude now.

SHRI GURUDAS DASGUPTA (GHATAL): I am not afraid that the 26 public sector

banks can be privatized. You do not have that power. However powerful this Government

may be to muster the number in the House, you are not that powerful as to abolish the

nationalized character of the public sector banks in the country. … (Interruptions)

MR. CHAIRMAN: Please conclude now.

SHRI GURUDAS DASGUPTA (GHATAL): People will be against you and will not

allow you. That is not my fear. … (Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): I am telling you a proverb. The older you

are, the senile you are. Senility arises out of advanced stage. … (Interruptions)

Sir, I am saying, it is a step in the direction of further liberalization when you cannot

de-nationalise. That power you do not have. In the Indian democratic system, public

opinion is stronger than what you have in your pocket. …(Interruptions)

My point is that you are trying to make bank a joint sector. That we shall oppose. I

tell you one thing. Whatever law you will promulgate, there is a public opinion.…

(Interruptions)

SHRI GURUDAS DASGUPTA (GHATAL): I believe, Indian public opinion will never

allow you to do whatever you like with regard to our public sector which has protected

India from international convulsion of recession.

Thank you, Sir.

(ends)

34

PROF. SAUGATA ROY (DUM DUM): TMC , LOK SABHA

Sir, I shall run through my points because the time is short. This Bill has come

after a study that was made by the Standing Committee on Finance. I am not quite

happy with the Report given by the Standing Committee but still I would like to speak

something on the Bill.

I thank the Finance Minister for withdrawing that proposal on including Forward

Trading. I think it would have been a retrograde step. Now, what do I think of the Bill? I

think that the Bill for which the Finance Minister was very eager is a mixed bag. It has

two separate parts. In one part, it seeks to empower the Reserve Bank of India further

to maintain the Regulators role and to have a control on the Banks. Even now, even on

the other businesses of the Bank, the Reserve Bank will exercise control.

On allowing beyond 5 per cent shareholder, the Reserve Bank will have to give

permission. It will also empower the Reserve Bank to supersede the Board of Directors

of Banking Companies by an appointment of the Administrator. It will allow primary

cooperative societies to carry on banking operations after obtaining a licence from RBI.

It will allow special audit of cooperative banks. There have been many cases of fraud in

cooperative banks. So, it is empowering the RBI to do a special audit of cooperative

Banks. I have no quarrel with this part of the law because I feel that the Banking sector

does need a strong Regulator. The Reserve Bank and its Department of banking

Operations, it has done a good job in keeping a control over banks. Further control

especially on cooperative banks is necessary. You know about this Hiten Dalal and

these cooperative banks - how people were duped. There is a necessity for controlling

banks.

Where I disagree with the Bill is in the philosophy of the Bill? I disagree with the

philosophy of the Government. This Government believes that Foreign Direct Investment

is panacea for all economic ills facing the country, for its low rate of growth, for its high

fiscal deficit, for its rate of inflation. There the Minister has already allowed 74 per cent

FDI in private banks and now, it has also allowed 20 per cent FDI in Public Sector

Banks. I feel bad because I was in the Congress since 1969 when Shrimati Indira

Gandhi nationalized the banks. There was so much enthusiasm. A Government which

calls itself a Congress led Government is now diluting shares in Public Sector Banks.

This makes me very sad that this is the prescription that they have for the economy.

35

Now, the main emphasis is to remove the restriction capital. Formerly, it was Rs. 3000

crore. Now, with the approval from RBI, the nationalized banks can raise capital through

bonus and Rights issue. The Banking Companies can now issue Preference Shares

subject to regulatory guidelines by the RBI. It is raising the cap on voting rights.

Earlier the Finance Minister has proposed for removing all caps on voting rights in

private sector. After the recommendation of the Standing Committee on Finance, the

cap is at 26 per cent. In the case of Public Sector Bank, the cap is at 10 percent. These

are insidious ways that the foreign companies enter into India and Indian Banking Sector.

Now I must tell you that from 1991, Shri Chidambaram was one of the first

proponents of liberalization. I have no quarrel with liberalization nor do I have any quarrel

with reforms. But the Americans have been pressing us to open up so that they could

invest. We are opening up one by one. But they are not investing. They have got many

other places to invest. I would request the Government and the Finance Minister at the

helm of affairs to consider whether FDI alone can solve the problem or a better way

can be found by raising the per capita income of the people, purchasing power of the

people and strengthening our own economy. That is a point to be considered. Now

banks have been opened up. Next, there will be a Bill on Insurance.

Then there will be a Bill on Pension Fund. Ultimately, we are opening widely. But

the Americans or the foreigners will not rescue our economy. This is what happened to

Mr. Gorbachev. He believed that by doing Perestroika, Americans would rescue his

economy. The whole Soviet Union collapsed. This is what we are going towards in the

long term.

Let us see the performance of the international banks. Now what has happened?

According to a report from Reuters published this month, the City Group – Shri Vikram

Pandit, an Indian was sacked – has announced a job cut to the tune of 11,000 this year.

This is in addition to 96,500 job cuts effected from 2007 to 2011. The Bank of America,

another leader, is reported to have cut 11,000 jobs this year. In short, the top ten Banks

worldwide have together cut as much as 1,50,000 jobs since July this year. Does the

Finance Minister want our banks to follow the footprints of these so-called world leaders?

One of the ambitions of the Finance Minister, as he has expressed, is that he wants

merger of banks. He has removed scrutiny of the Competition Commission about the

merger. He says that we want a world size bank. This is what is happening to the world

class banks and however merger you do, you will not be able to match the Chinese

banks in their debt and split.

36

Secondly, how many banks have failed in the West? According to the list of failed

banks released by the Federal Deposit Insurance Corporation of the US, an astronomical

457 banks went bankrupt since global financial meltdown in September 2008. Do you

want to import this culture of private tycoons earning a fortune at the cost of millions of

marginal depositors to be rescued by our own Deposit Insurance Corporation? This is

a question which I ask the Finance Minister, avowed reformist to ponder.

Let us also remember as to what happened in the global field since 2008 meltdown.

Companies like Bear Stearns, Lehman Brothers, Merrill Lynch, Northern Rock, Freddie

Mac crashed like a pack of cards. Indian system survived the 2008 meltdown. Why is

the Finance Minister doing away with the strength of the Indian Banking System? This

is the basic question I am asking. You do reforms by all means. But reforms do not

mean destroying or weakening our basic structure which has been built up through

blood, sweat, toil and tears of Indian poor people. Let us remember that we still have

foreign banks in the country. Do they go to the rural areas to open banks? No. Do they

lend in priority sector? No. They are only interested in mopping up deposits in the big

cities. They open stylish, air-conditioned and spic and span branches. But they are not

for the poor people of this country. What are we driving towards?

PROF. SAUGATA ROY (DUM DUM): That is the basic question that I ask. That is

why, I humbly say that I oppose the so-called dilution of the share holdings of banks and

opening of the banking sector to the FDI.

Sir, all I want to say humbly is that the Banking Laws (Amendment) Bill has been

brought urgently. Earlier the Minister passed in this House the Securitisation Bill. We

supported it. We said – as Mr. Gurudas Dasgupta, an expert on banking, a leader of the

AIBEA, is fond of saying - why are the nonperforming assets increasing? Why do not

you publish the list of big defaulters, big capitalists? Why do not you take stern action

against them? By diluting the national holding in banks, I am not going to change the

picture of Indian banking industry.

With that I thank you and wish you a long life.

(ends)

37

COM. KHAGEN DAS, CPI-M LOK SABHA

SHRI. KHAGEN DAS (TRIPURA WEST) Mr. Chairman, Sir, I rise to oppose the

amendments proposed to the Banking laws (Amendment) Bill, 2011 by the Hon. Finance

Minister.

At the outset, I would like to say that in 1999 the World Bank and the InternationalMonetary Fund jointly sponsored a Financial Sector Assessment Programme (FSAP)for assessment and implementation of various international financial standards by itsmembers. India became a member of FSAP in 2001. In tune with the diktats of FSAP,the UPA Government – I introduced the Banking Regulation (Amendment) Bill, 2005 inthis House on the 13th of May, 2005. But the Government did not dare to proceedfurther due to the stiff opposition from the Left parties on whose support the Governmentsurvived.

The present Bill seeks to make sweeping changes and amendments to the BankingRegulation Act, 1949, the Banking Companies (Acquisition & Transfer of Undertakings)Act, 1970 and 1980. The Bill is dangerous for the existence of public sector bakingsystem as also for the maintenance of indigenous character of public sector banks.

In the Statement of Objects and Reasons of the Bill the Government has said:

“The banking companies are now operating in liberalized environment. In thisscenario, it has become necessary that the banking companies in India are enabled toraise capital in accordance with the international best practices.”

The words sound attractive. But the unmistakable agenda, however, is to makeour banks follow the footprints of the world leaders. What is the position of the worldleaders ? Mr. Roy has mentioned that. According to a report from Reuters on the 6th ofDecember, 2012, the ten top banks worldwide have together cut as many as 1,50,000jobs since July this year. Do you want Hon. Minister, our Banks to follow the footprintsof these world leaders in the liberalized environment?

The Statement of Objects and Reasons of the Bill says that the private corporateshould be free to set up and run private banks. What is the track record of privatebanks in the land of your political leaders, Mr. Minister ?

As per the list of failed banks, released by the Federal Deposit InsuranceCorporation of the US, Mr. Roy also has mentioned this; as many as 457 banks wentbankrupt since the global financial meltdown in 2008. When the global financial crisisswept away several parts of the world in 2008 on both sides of the Atlantic, companieslike ear Stearns Lehman Brothers, Merrill Lynch, Northern Rocks, Freddie Mac, etc.crushed like a pack of cards. In India, the banking system survived the tremendoustremor, as it was insulted, because of its overall public sector character. So, India wassaved. But the Government would not learn from these experiences. The policy makersof our country are hell-bent to denationalize the banking sector, even to the detriment ofour national interest.

38

Due to time constraints, I would like to highlight only a few important aspects. Thefirst is, section 12 (2) of the Banking Regulation Act, 1949, as it stands at present, putsan upper limit of 10 per cent on the voting rights of any shareholder of a private bank.But the newly introduced bill seeks to increase it to 26 percent. With 74 per cent FDIbeing allowed in private sector banks, any two foreign entities, each holding 26 per centshares, shall be at liberty to jointly takeover, at will, the management of anyprivate bank.

The second is, in terms of subsection 2 (e) of section 3 of the Banking Companies(Acquisition and Transfer of Undertaking) Act, 1970 and 1980, popularly known as theBank Nationalisation Act, the voting right of a private shareholder of a nationalized bankhas been capped at one per cent. The Bill seeks to increase the cap from one per centto 10 per cent, with more shares in private hands; so, any five or more corporate mayjoin hands to form a cartel and take over any nationalized bank. The third is while weare in favour of strong and RBI, in regard to permitting or debarring anyone in thematter of acquiring shares in a banking company, which may be abused, misused andused arbitrarily. Hence, we suggest that the power sought to be conferred upon theRBI, it should be tampered with suitable built-in guidelines, and exercise of that powershould be subject to scrutiny of the Parliament by appropriate amendment of section 5of the Bill.

According to section 2 (a), the merger of banks will be exempted from CompetitionCommission Act, 2002. This means that no permission is required from the CompetitionCommission for merger of banks. The merger of banks will be undesirable in our country.The big banks will not care for the poor people and common people.

The Bill seeks to allow the banks to enter into forward trading business. Temporarily,the hon. Minister has withdrawn it, but he has this in mind, and he would take a decisionon this later on. We have seen in the past and we all know about the forward trading. Itis just an euphemism for speculation. There is a rider of prior permission of the ReserveBank of India but there is no guideline for granting such permission by RBI. Oncepermitted, savings of the common people, which as of now is more than Rs.60,00,000crore in commercial banks, will be deployed in speculative purposes or business,euphemistically called forward trading thereby endangering the safety and security ofthe hard earned money of the common man. Hence, I am of the considered view thatthe amendments proposed in the Bill would be highly detrimental to the interest of ourbanking and financial sector and that of our national economy and hence should not bepushed through and the Bill be withdrawn.

It may be mentioned here that the bank employees’ organisation called a strike on20th of December against this Bill. I again oppose the amendments moved by the

Finance Minister tooth and nail. With these words, I conclude. Thank you.

(ends)

39

SHRI S. SEMMALAI (SALEM): Thank you, Mr. Chairman, Sir. I stand to speak

on the Banking Laws (Amendment) Bill, 2011. In my view, this Bill is against the spiritof late Prime Minister Shrimati Indira Gandhi. Shrimati Indira Gandhi nationalized thecommercial banks but our hon. Finance Minister, at one stroke, tries to reverse thepolicy of his own leader. Any reform is welcome if it paves way for holistic developmentof the particular sector. But I doubt whether the Bill has the required nuance for thedevelopment of banking sector.

Take Section 2 (a); at one stroke it takes away banking mergers and acquisitionsout of the purview of Competition Commission. Ultimately, it will rest on the ReserveBank of India. If the Government takes out the banks from the purview of the CompetitionCommission, what is the guarantee that others like insurance sector will not ask forthe similar exemption? Then where there is the need for a Competition Commission?So the provision, I feel, is unethical because 60 per cent of our population is still nothaving bank accounts. Only 5 per cent of the villages have banking facility. The moveto allow RBI to have a final say in bank mergers, I fear, it would pave way for the privatesector to have control over the banking industry. I think the Finance Ministry’s recentthinking is to restore the original status and to allow Competition Commission to havea final call in this regard. If it is so, it is welcome.

Then, the rise in the cap on voting rights of private players from 10 to 26 is held bya few as a path breaking move. It will lead corporates and private sector to take overthe banking industry. It will open the doors for foreign corporates to invest in a big wayin the Indian banking sector and ultimately crush the public sector’s initiative in bankingindustry. The United States prohibits industrial houses from operating banks. Likewise,South Korea also prohibited industrial houses from promoting new banks following thefinancial crisis in 1997.

Then, why should we allow a move in a different direction. Let our hon. FinanceMinister to think about it. In the face of the global economic crisis in 2008, Indianbanks show remarkable resilience. Thanks to public sector banks’ strong position.Allowing private sector in banking industry will destroy the very future of the economy.They are interested in making profits and they do not worry about the poor. So, Iappeal to the hon. Finance Minister to treat cautiously in this regard. I also appeal to thehon. Finance Minister not to raise the voting rights to 26, as found in Section 12, all of asudden. Mostly, the recommendations of the Khandelwal Committee are not for thebenefit of the bank staff. This is the feeling of the bank staff. Most of therecommendations of the Committee adversely affect the prospects of the bankemployees. So, I would request our hon. Finance Minister to listen to their grievancesin person and redress them in a spirit of given time. In conclusion, Chairman, Sir, Imake one special appeal to the Centre. In the name of reforms, in the banking sector,please do not allow industrial giants to take over the small fishes in the banking pond.Let us not kill the goose that lays the golden eggs. We shall have to develop a balancedhealthy banking sector with public sector banks continuing to play a big andsignificant role.

40

SHRI PRASANTA KUMAR MAJUMDAR (BALURGHAT) :

Respected Chairman Sir, we all are aware of the economic condition of theEuropean countries as well as America. Lehman Brothers, Federal Bank and suchother financial institutions have all gone bankrupt. There is acute financial crisis inthose nations. They are unable to return the deposits of the customers. Both theGovernment of India and the opposition parties have asserted that the recession didnot have any adverse impact on the Indian economy. It is partly true. The reasonbehind this is the banking system which is in place in this country. The nationalizedbanks are monitored by the Reserve Bank which in turn is regulated by the Ministry ofFinance of the Central Government. This has helped to cushion the adversities in oureconomy.

But now, this Banking Laws (Amendment) Bill 2011 has been brought about whichmay lead to weakening of the entire system. FDI is being invited, foreign funds arewelcome today. LIC Bill, Pension Bill are in the offing. All these measures will actuallyhave an adverse impact on our economy. We are aware of the contributions of thenationalized banks in building our nation. But if foreign banks are allowed to operatehere and their voting rights are raised from 10% to 26%, there will not be any kind ofregulation left. The public sector banks, the RBI, as well as the Government will weaken.Only the foreign banks will make profit and will add to the fortune of the Europeannations. Thus I request the Government to review the policies and keep the economystrong enough to handle every crisis successfully. I vehemently oppose this Bill due tothese reasons.

Another point is that there are large number of state or unoperated accounts inalmost all the banks where funds are lying idle. That money do not belong to theGovernment. It is planning to spend the amount in the education sector or for otherprogrammes. But this is not legitimate. The money should be returned to the accountholders. People might have not been able to operate their accounts for unforeseendifficulties but they must not the deprived of their own money. Some actually may notknow about the accounts of their forefathers. So the Government should identify theaccount holders and give back their dues immediately.

I also suggest that Section 8A which proposes to make the subsidiary banks andgive duty relaxations, should be deleted. And in the end I like to mention that the publicsector banks, RBI and Finance Ministry should adopt stronger policies and strengthenthe economy only then we will be able to prosper.

I also request the Government to consult with the employees of the banks.The unions are very organised and strong and can provide useful assistance in

chalking out policies.

With these words, I thank you for allowing me to participate in this debate and

conclude my speech.

41

FINANCE MINISTER’S REPLY TO THE DEBATE : 18-12-2012

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Mr. Chairman, Sir, I am

grateful to all the hon. Members. I begin by thanking Shri Anurag Thakur, a young

Member who made a very responsible speech and I thank all the hon. Members ending

with Shri Badruddin Ajmal Saheb. Sir, a Bill on banking is liable to be misunderstood;

and I am afraid, some of the criticism is based on a mis-appreciation of the Bill. Perhaps

it is my fault that I did not take enough time explaining the Bill when I moved the Bill. It

was under rather stormy circumstances that I had to move the Bill.

But I will take a few minutes, not very long, because the Bill is a very short Bill; it

has certain clear objectives; and I will answer every question that has been raised.

Firstly, Sir, let me make it very clear that our Government, as I believe every section

of the House, UPA-I, UPA-II is totally committed to strengthening the public sector banks

and to maintaining the public sector character of our public sector banks. Let there be

no doubt about it.

In fact, it is part of this commitment that we continue to strengthen the public

sector banks by infusing more capital. A bank cannot survive, a bank cannot grow

unless we keep infusing more and more capital into it. You may ask me, why? It is

because of prudential norms that a bank can lend only so many times the amount of

capital it has. These are BASAL norms laid by the International Banking Association

and BASAL. These are norms laid by the Reserve Bank of India. So, a bank simply

cannot lend once its capital adequacy reaches a saturation point. Therefore, we have

to infuse more capital into the banks… (Interruptions)

MR. CHAIRMAN (SHRI SATPAL MAHARAJ): Please do not disturb.

… (Interruptions)

SHRI P. CHIDAMBARAM: You will. That is the problem… (Interruptions) You will

disturb if you ask me a question now… (Interruptions)

MR. CHAIRMAN: Please do not disturb.

Mr. Minister, carry on please.

SHRI VIJAY BAHADUR SINGH (HAMIRPUR, U.P.): Is he a disturbing?

SHRI P. CHIDAMBARAM: No. He is not disturbing; his question may be

disturbing.… (Interruptions)

42

This year, for example, before the 31st of March, we will infuse another Rs. 15,000

crore into our public sector banks. Next year, we will have to infuse more, as Mr.

Mahtab – who is not here — had said. The projection is that we will have to infuse far

more money. On the one hand, you say that the public sector banks must be protected

but the private sector banks are growing. Why are our private sector banks growing?

It is because they raise more capital. They are free to raise more capital.

Since in the public sector banks, it is the Government that has to infuse capital,

we have now said that the capital now can be infused by Rights Issues, Bonus Shares

etc., so that every accepted mode of raising capital without diluting the public sector

character of the banks can be employed; and the banks will get more capital.

The Government is committed to infusing more capital. Today, the public sector

banks have a share of about 75 per cent of the business. So, notwithstanding the

competition posed by private sector banks, the public sector banks are holding their

own. Our largest public sector bank, the State Bank of India, is several times bigger

than the largest private sector bank but if we must remain a large public sector bank,

we must infuse capital. We must allow our banks to grow.

The objectives of this Bill are fairly simple. Most of the provisions of the Bill are

intended to strengthen the regulator, the RBI. I do not need to read all the provisions

which are intended to strengthen the RBI but I think everybody agreed that most of the

provisions are intended to strengthen the regulator. There were some provisions which

raised some concern and I intend to answer every one of them.

But before that, I want to point out that the major recommendations of the Standing

Committee have been accepted and they have been brought in by way of official

amendments. There are a couple of small changes we have made in one or two

recommendations but I have discussed this. Then, there is no major quarrel about the

small changes that we have made. These are drafting changes. These are changes

which are necessary in the recommendation that is made.

There were two recommendations and that have caused some controversy but I

am happy that the controversy has been resolved. The first one related to a

recommendation made by another Standing Committee. I would not go into it in great

detail but for the sake of the record, in order to clarify the position, the Department—

this was the position of the Department even before I took over—and in fairness to the

officers of the Department, I am bound to clarify it. Another Standing Committee, the

Standing Committee on Food and Consumer Affairs chaired by another distinguished

Member, Shri Vilas Muttemwar, consisting of Members of all the sections of the House,

including the Members of the principal Opposition Party, based on a report of the Working

43

Group of the RBI, for good reasons recorded in that Committee’s Report, which I would

urge you to read, if not today, some other day because today it is not pressing issue

now, recommended that the particular provision be introduced, which is why that

particular provision was introduced. As we pay, as we acknowledge the sage advice of

one Standing Committee, we also acknowledge the advice of another Standing

Committee. But the rest of the Bill is too important for me that this Bill should pass

because the RBI is waiting for this Bill to pass to acquire the additional powers. After

the principal Opposition Party and some others did say, please do not press that clause,

I said, all right, I will not press that clause. But in fairness, I must say it is based on a

recommendation of a Working Group of the RBI and the recommendation of a Standing

Committee in which all sections of the House were represented.

The other clause regarding Competition Commission, I am afraid, the Members

may not have noticed the fact that I have modified that decision. Mr. Mahtab mentioned

it. When this clause was brought that banks should be taken out of the Competition

Commission, the Standing Committee on Finance recommended the following and I

read that short paragraph. “The Committee, while supporting the proposal to keep

bank mergers, etc., outside the purview of the Competition Commission of India for the

time being, would recommend that this exemption should be considered as a special

case and an expedient measure to be re-visited in due course in the light of experience

gained both by the regulators, namely RBI and the Competition Commission.”

So, the Committee did not endorse this. The Committee said, all right, for the time

being you can keep it but please re-visit it. When I took over, I re-visited it and I am not

pressing that clause either. I have already given notice that that clause has not been

pressed. The RBI will be a regulator for all banking activities under the provisions of the

Banking Regulation Act. The Competition Commission will be the regulator for

competition because as Mr. Mahtab rightly pointed out, if I take out the banking sector,

the insurance sector says, take us out because we have a regulator, the IRDA. The

telecom sector says, take us out because we have a regulator, the TRAI. The petroleum

sector says, take us out because we have a regulator, the Petroleum Board. Therefore,

we decided in the Cabinet that we will not take out the banking sector from the

Competition Commission. The RBI will continue to regulate the banking sectors as far

as the banking regulation is concerned.

The Competition Commission will also regulate anti competitive practices and

would have to approve any merger. So, that caution of Standing Committee has also

been accepted and we are not voting in favour of that clause. I have already issued

notice that we would vote negative against that clause.

PROF. SAUGATA ROY (DUM DUM): I have not received any notice by you.

44

MR. CHAIRMAN (SHRI SATPAL MAHARAJ): Please do not disturb the House.

SHRI P. CHIDAMBARAM: Notices are issued to the House.

SHRI SATPAL MAHARAJ: Please sit down. Hon. Minister, address the Chair,

please.

… (Interruptions)

SHRI P. CHIDAMBARAM: Saugata Roy ji, I am explaining it now. As to how many

bank accounts are idle, I think, Mr. Anurag Thakur raised this point. It is 1,12,49,844

accounts are idle and Rs.2,481 crore are there. But, sufficient safeguards have been

provided in the Bill. Even after a ten year period, if the person, who owns the account,

comes and asks for the money, he must be returned the money and the bank will claim

the money from its deposit account. Even if it takes 15 or 20 years, nobody’s money

will be taken away. It is not our intention to appropriate anybody’s money. But, we

cannot allow Rs.2,481 crore to lie idle. We will use it but if he comes and claims it, we

will return the money. We have appointed Justice Srikrishna Committee to look into all

financial sector laws and to give us a report on redrafting all financial sector laws. That

report has come in the draft form. Comments have been invited. Once that report is

finalized, I hope that we will have an opportunity to draft a comprehensive banking law,

but, at the moment, the only thing that I can do is to amend the

The questions were asked about branches being closed. I mean, I do not know

where we get that impression. It is possible that in a village or on the same road or in a

town, two branches may be amalgamated. That is not the record of our Government.

We have added 6,489 branches in the year 2011-12. This year we will add approximately

the same number. I did give that number once. It is roughly about 18 or 19 branches a

day that we had added. Apart from that, in the last one year, when the scheme was

announced, we have opened 32,518 ultra small branches. Therefore, enough branches

have been opened. We will open branches approximately at the rate of about 6000 a

year. That is the plan.

There are some questions about our merging small branches. Sir, there is no

provision in the amending Bill regarding merger. There is no provision in this Bill at all.

Whatever law is there, it is there; there is no provision in this Bill about any merger. We

are not introducing any new provision.

There is a question about education loan. Sir, personally this is a passion for me.

My friends in Tamil Nadu know that I have never spoken at a public forum without

emphasizing education loan. Today, as on 30th of September – it is a part of the loan

45

that has been taken and repaid – Rs.52,000 crore per 24 lakh accounts are outstanding.

I receive complaints from my constituency or elsewhere.

We have a section in the Department of Financial Services which receives

complaints. Each bank has a cell which receives complaints. I am not saying that there

are no black sheep in the banking industry. I am not saying that there is no heartless

manager, maybe it is one here or one there. In fact, if there is one there and one here,

give me his name and I will pass it on to Gurudas Dasgupta ji. So, he can take action.

… (Interruptions)

MR. CHAIRMAN: Hon. Member, please be seated. … (Interruptions)

MR. CHAIRMAN: No interruption, please. … (Interruptions)

SHRI P. CHIDAMBARAM: We are giving loans and I said, I think, I said it in the

other House, that if any hon. Member wishes to hold education loan camp in his

constituency, please write to me and I will ask the lead bank to hold the camp in his

constituency. But, we must take the initiative. Some money has to be spent, of course,

in making arrangements. But, it cannot be helped. Some preliminary arrangements

have to be made, a hall is to be acquired, some banner has to be put up and some

advertisement has to be done. But, you must do that. If you do that, I will ask the lead

bank to hold the camp.

A question was asked about FDI in public sector banks. This is no new provision.

This is a provision in the 1980 Act. Section 2D of the 1980 Act contains a provision that

any non-resident can hold shares up to 20 per cent. We have not made a new provision.

This has been a part of the Act for many many years. No new provision is being made.

Some question was asked about retrenchment in world banks and others banks

and what we are doing here. Why are we concerned about the world? If the banking

system in the world retrenches, let them retrench. Look at what we have done. In

2011-12 all public sector banks together – Officers, Clerks and Sub-staff – we have

recruited 55632 young men and women. This year the plan is to recruit 84489 young

men and women. We are opening 6000 branches; how can we not recruit? Even if I

take three or four people to a branch – Officer, Clerk and Substaff – I need for 6000

branches, 25000 people. Then people are retiring and some people leave for other

jobs. We are recruiting 84489 people this year. I cannot see in the foreseeable future

our banks retrenching anyone. On the contrary, in the foreseeable future – for the next

five years, ten years, twenty years – we will be opening so many branches and we will

recruit many many more young men and women.

46

Shri Anandrao Adsul asked the question as to who is the appellate authority for a

penalty. For removal of managerial or other persons, there is an appeal to the Central

Government under Section 36 AA (3a). For cancellation of the licence there is an appeal

to the Central Government under Section 22 (5). For imposition of the penalty, there is

no appellate authority; one has to go to the writ court under article 226 of the Constitution.

There were some questions about the NPA. I think I answered a question in this

House. When the economy is in some stress, some sectors also will be under some

stress. It is because some sectors are under stress, the economy is under stress. If

every sector is doing well, why should the economy be under stress?

Some sectors are under stress. I believe, and I think the Prime Minister agrees

with me, when the economy is going through a slow down or under stress, this is not

the time to tighten the screws on the stressed sector. This is time to hand hold them,

help them come out of this difficulty, so that when the economy recovers, that sector

recovers and they will repay the loan. They are not wilful defaulters. There are some

sectors which are under stress. So, this is the time to restructure the loan. RBI guidelines

allow for restructuring of the loan.

MPs have approached me with individual cases to help restructure the loan. That

is the right thing to do. You cannot allow an industry in your constituency to close down

just because it is under stress today. This is the time to help the industry tide over the

difficulty. Let us hold on for six months, twelve months or so. The economy will recover.

Therefore, there is a slight rise in the proportion of NPA, nobody is denying that. Gross

NPAs today are 3.1 per cent as on 31st of March. Net NPAs are only 1.4 per cent.

Therefore, these NPAs have been fully provided for. … (Interruptions)

That is what I said. Please do not introduce concepts which are unknown to banking.

Every country in the world, every bank has NPAs. If there was no NPA, if everybody

repaid his loan, if everybody paid his interests, no account has become bad, then we

must be at the edge of cloud nine. This is utopia; it just 18.12.2012 Uncorrected would

not happen. There will be some reason or the other and therefore …

(Interruptions)

Please do not interrupt. There will be NPAs. The net NPAs are only 1.4 per cent. I

have said it and I say this guardedly that yes, this is a matter of concern. But this is not

a matter for alarm. This is the time to help restructure the loan, help the industry come

out of the stress and they will come out of the stress and these loans will become –

what are doubtful assets will become standard assets over a period of time.

47

Sir, our banks are well capitalised. We are well above the Basel norm. We will be

ahead of the new Basel 3 norm because we capitalise them repeatedly. They have

enough money to lend. The economy is going through a slow down.

But, as I said, it will come out of this trough; it will recover and when it recovers,

banks will be required to lend more money.

Banks have the liquidity to lend more money. The RBI has infused Rs. 1,46,290

crore of liquidity in the banks. Banks have enough liquidity to lend money to all sectors

and to all segments that require money.

I think, I have answered all the major questions. There were some questions about

consolidation. Please understand not one of our banks is among the top 20 banks of

the world. China has three. Today if a loan size is about, say, Rs. 6,000 crore, there is

not a single bank which can take the portfolio on its book. It has to put together a

consortium. India for the size of its GDP, for the future that we envision, we need world-

size banks. Nobody said that all 27 public sector banks would be consolidated. Please

read my speech at BANCON and I made the same speech four or five years ago. This

is based on the Narasimhan I Committee and Narasimhan II Committee. We said that

we need two or three world-size banks and two or three world-size banks will come by

some smaller banks consolidating with the larger banks of this country, but we will still

have over 20 public sector banks and each one of them will grow. We need world-size

banks. I am prepared Comment to debate it in any other fora. There is no time today.

We need two or three worldsize banks. If the private sector banks will become larger

and larger, should not the public sector banks also keep pace and become larger and

larger? I think, there is a case for merger of banks and there is a case for two or three

world-size banks.

I come to my last and concluding statement. One of the hon. Members blamed

what he described as the Manmohan-Chidambaran model. Please do not equate me

with the Prime Minister. The Prime Minister is a distinguished economist; I am not. The

Prime Minister has vast experience; I do not have. But the Manmohan model also

showed to this country that we can achieve above nine per cent growth. The Manmohan

model also showed to this country that we can reduce our fiscal deficit to below three

per cent and it came to 2.7 per cent. …

(Interruptions) Therefore, do not blame this model. If you blame the Manmohan

model …

(Interruptions) I am not yielding. … (Interruptions)

48

MR. CHAIRMAN (SHRI SATPAL MAHARAJ): Please keep quiet. Please sit

down.

… (Interruptions)

MR. CHAIRMAN: Please do not disturb. Let the Minister reply. … (Interruptions)

SHRI P. CHIDAMBARAM: If you blame the Manmohan model, the Manmohan

model must also be credited … (Interruptions) If the Manmohan model is a model that

has crossed this, the Manmohan model must also be credited for making India the

second fastest growing economy in the world. With these words, I commend this Bill

and request all sections of the House to support it.

(ends)

SHRI D. RAJA (TAMIL NADU): CPI, RAJYA SABHA , 20-12-2012

Thank you, Sir. I rise to oppose the Banking Laws (Amendment) Bill. The reasons

are following. This legislation is a part of the Government’s agenda of economic reforms

to open up the country and economy for vested interests. This legislation is not warranted

at all in the interest of our banking sector.

Sir, section 2-A of the Bill talks about merger of banks. It is an attempt to exempt

merger of banks from the purview of the Competition Commission of India. This is

wrong, Sir. The mergers are not necessary for our country. We need bank expansion,

not consolidation. This clause must be withdrawn. I do not know, at this stage, whether

the Finance Minister will be able to withdraw this clause, but, I think, that clause will

have to be withdrawn. We need strong banks, not big banks. We have the experience

of the United States of America where the big banks have miserably failed. Let us not

expose our banks to the risk.

Then, Sir, clause 12 (2) increases voting rights of private, domestic and foreign

shareholders of our private banks from present 10 per cent to 26 per cent. Sir, this is a

very wrong move. Our immediate neighbour, Sri Lanka – I have lot of problems with Sri

Lankan administration, but I would love to underline this fact – has reduced it from

10 per cent to 5 per cent to reduce the control of private capital in banks – if, I am

wrong, the Finance Minister can correct me – whereas, shamefully, our Government is

increasing it to 26 per cent, which is very wrong.

Then, Sir, in 25 Indian private banks, the total capital is Rs. 4,900 crores, but the

total deposits of Indian people are Rs. 11 lakh crores. By increasing the voting, we are

allowing more influence of private capital in these banks dealing with huge public savings.

49

This is not good, Sir. The Finance Minister should realise this. This will encourage

more foreign capital in our banks. They will come here for profits only. So, our banks

will lose their objective of serving the people and become profit-making machines.

Here, everybody referred to late Prime Minister, Madam Indira Gandhi. When she

nationalised banks, there was purpose, there was a national objective. Now, this

Government is deviating completely from that national objective on which Madam Indira

Gandhi took very positive, historic steps which left applauded.

SHRI D. RAJA (CONTD.): Sir, I am again coming to clause 3 of the Bill. It proposes

to increase the voting rights in nationalised banks from one per cent to ten per cent.

Why this steep increase of ten times? Why does the Government want to please

private capitalists?

The Government banks today deal with more than 50 lakh crore rupees which is

people’s money. The Government should be the custodian of public savings. Giving

more voting rights to private shareholders will bring pressure on banks to dilute their

social objective and concentrate on profit banking.

MR. DEPUTY CHAIRMAN: Please conclude.

SHRI D. RAJA: Sir, I will take only one minute. After this amendment, other follow-

up actions are going to take place. We know the experience of our own country. We

have had private sector banks prior to 1969. Tatas had the Central Bank; Birlas had the

Uco Bank; Pai had the Syndicate Bank; and Chettiars had the Indian Bank. There was

a lot of mess. That is why Madam Indira Gandhi went for nationalisation of banks.

Again, this Congress-led UPA-II Government wants to give licence to them. Global

experience is there. Industry and banking should not be in one hand.

MR. DEPUTY CHAIRMAN: Please conclude.

SHRI D. RAJA: Sir, I am concluding. Today, lakhs of bank employees went on

strike at the call given by the All India Bank Employees Association. Why should

bank employees go on strike? They are not doing this in their personal interest. They

are doing this in the interest of country. They are doing this in the national interest.

MR. DEPUTY CHAIRMAN: Please conclude.

SHRI D. RAJA: Sir, I have been thinking this Government is drifting from the

Directive Principles of the State Policy of the Constitution. Now I understand why

parties like the TMC are accusing the Government. The Government is deviating

completely from the Preamble to the Constitution by giving up the socialist concept. I

50

make an appeal to my hon. colleagues from the BJP because it is extending support to

such retrograde and anti-people policies. I hardly find any difference between the

Congress Party and the BJP as far as economic policies are concerned. This makes

our task...(Interruptions)...

MR. DEPUTY CHAIRMAN: Rajaji, please conclude.

SHRI D. RAJA: The Left will continue to fight these policies. The Left will continue

to oppose these policies in order to provide an alternative to save India’s interest, to

save India’s banking sector.

Thank you, Sir.

(Ends)

SHRI SUKHENDU SEKHAR ROY : TMC, RAJYA SABHA, 20-12-12

Sir, while we are discussing these amendment Bills, as rightly pointed by my

distinguished colleague, 7 lakh bank employees have resorted to All India Bank Strike

today in protest against this amendment Bill. They are not only concerned, but we are

equally concerned like millions of our countrymen. In the name of reforms and

liberalization, many things are happening which ought not to have been done in this

way. The Act is proposed to be amended.

In short, I can submit a point. Mr. Mungekar was referring to the banks nationalization

initiated by late Smt. Indira Gandhi on 19th July, 1969, where 14 banks were nationalized

with only a deposit amount of Rs. 50 crores. In 1980, 6 more banks were nationalized

with a deposit amount of Rs. 200 crores. Why the banks were nationalized? At that

point of time I was in my final year of college. Indiraji, in her address to the nation, said

that the main reason for nationalization was that the commercial banks facilitated

concentration of economic power in the hands of a few and created monopoly in the

country.

Priority sectors were neglected and banks did not pay attention to credit needs of

farmers and SMEs; management lacked professional expertise; resources of banks

were misused for the directors and their companies; and, bank credit was not made

according to five-year development plan. These were the main reasons for the

nationalization of banks. It contributed immensely to our national economy because in

the early 80’s, the nationalization of banks contributed to 5-6 per cent growth of

our country.

51

Because of nationalization of banks, in India today, the banks have nearly Rs.70

lakh crores as deposits; the bulk of which is the hard earned money of the common

people.

Sir, with this amendment, I do not know whether we are going to protect the interests

of the common depositors or we are opening the doors of our banking sector for the

foreign players and the big corporates. That is the moot question involved in this

Amendment Bill. From early 90’s, the rural credit deposit ratio has started declining

sharply. The share of agriculture and SMEs in total bank credit has declined alarmingly.

All this has happened in the name of reforms. I do not know whether this Bill will arrest

that situation. I am putting a pointed question to the initiator of this Bill, hon. Finance

Minister. Side by side, if we look at the mal-administration and rampant corruption

prevailing in the banking sector and the management at the top level, non-performing

assets rose to around Rs. 1.17 lakh crores as on 31st March, 2012 compared to

Rs. 74,16,074 crores as on 31st March, 2011. This figure was arrived at after writing off

and restructuring the big loan amounts.

Sir, the actual amount of NPA will be well above 2.5 lakh crores of rupees according

to experts; if we take into account the written-off amounts and the restructured amounts

which are being drawn every year for the benefit of—what Mr. Sen has rightly pointed

out— the ‘big fish’, about 25 to 30 per cent of gross profit of the banking industry have

been utilised every year to write off NPA and banks are increasing finance to restructure,

which includes real estate, stock exchange and forward trading. Why am I saying so?

Because, the American banking system has been suffering from the crisis of sub-

prime lending. Our banking sector is heading towards that. This Amendment Bill will

actually encourage the creation of the crisis of sub-prime lending in our country too.

The Amendment Bill, according to us, Sir, is opening the doors to crony capitalism and

the unscrupulous foreign players in the name of more investment in the banking sector.

If we look at the amendments properly, we will find that by inserting new provisions and,

by amending the old provisions, this Bill will pave way for unrealistic trade margin and

resultant closure of branches whereas the need of the hour is opening up of new

branches to serve the population, which does not have any access to banks. It is more

so because no permission is required for the Competition Commission for merger of

banks. This is highly unethical. What is the need of the Competition Commission?

Wind up the Competition Commission. This will also expose people’s money to

unwarranted risks as bank security investment consists of savings of the people and

these provisions allow these to be utilised by private corporates.

SHRI SUKHENDU SEKHAR ROY (CONTD): This will also allow the foreign

investors to take over Indian private banks. This will be free-for-all-situation particularly

for the foreign players. The voting rights and the shareholding pattern of private banks

52

will increase manifold with higher voting rights and foreign direct investors which

according to us will affect our banking sector manifold and the ‘foreign direct intruders’

- I call them foreign direct intruders, FDI — will easily take over and control our private

banks which have a total deposit of Rs.8,22,801 crores. Sir, by introducing this Bill, the

present Government has taken a U-turn from the path pursued by late Shrimati Indira

Gandhi. I am referring to it because of bank nationalisation. This is the age of ‘de-

nationalisation’; this Government has introduced ‘de-nationalisation’ in every sector.

Now it will cause a heavy cost for our banking sector too. Some one said that we are

mango people living in a banana republic. He is correct to some extent, he is right to

some extent because the way this Government is adopting policies one after another

in the name of reforms may lead to a situation when we shall be compelled to feel that

we are living essentially in a banana republic because all our policies are being dictated

upon and we are adopting these measures at the behest of the foreign dictators, the

foreign crony capitalists and we are adopting their policies which is not at all suitable

for our body polity, for our society as a whole. Knowing it fully well, we are introducing

all such measures in the name of reforms just to satisify their plan of action. There we

have serious objections. Our hon. Prime Minister has said that we are having outdated

philosophy. In the Preamble to the Constitution of India, Indiraji also brought ‘socialism’

through 42nd Amendment. If this Government has the courage to write off, to shake off

the outdated philosophy, then let the word ‘socialism’ be removed from the Preamble of

the Constitution of India. Let us see it, let the people of this country see it. First of all

declare that the Preamble is an outdated philosophy and then you go for such reforms.

Everything cannot be coined like this outdated philosophy. Socialism cannot be an

outdated philosophy. If socialism has suffered setbacks in certain countries, it does not

really mean that this philosophy is an outdated philosophy. We do not believe that, we

believe in socialism. Swami Vivekanandaji, whose 150th anniversary..

MR. DEPUTY CHAIRMAN: Mr. Raja is very happy. ...(Interruptions)...

SHRI SUKHENDU SEKHAR ROY: Everybody should be happy. ...(Interruptions)...

Everyone should be happy. It was Indiraji who pursued this. Unfortunately, the present

rulers have forgotten Indiraji. The party which was known for Gandhiji, Nehurji and

Indiraji that party is now known as the party of 2G, CWG and CAG. It is unfortunate, an

irony of fate. I will conclude my speech with a quotation from Swami Vivekanandaji. We

are going to observe 150th birth anniversary of Swami Vivekananda in January next

year. Once he said, “I believe in socialism not because it is the only way to reach the

goal, but half a loaf is better than no bread.”

SHRI SUKHENDU SEKHAR ROY (CONTD.): Therefore, Swamiji also believed

that in Socialism half-a-loaf is guaranteed, if not a full bread. But the way these

53

Amendments are being brought, even half-a-loaf is not guaranteed. It will be very difficult

for the common man to earn their two times meal if our banking sector also suffers the

advancement of the economic expansionism of the foreign players. Therefore, Sir,

according to...(Time-Bell)...

According to us, this Amendment Bill will transform our banking sector as a

playground of big corporates and international crooks in the name of liberalization and

reforms.

With these observations, I am opposing this Bill to the hilt.

(Ends)

MR. DEPUTY CHAIRMAN: Now, Shri N.K. Singh. Mr. Singh, you know how to

condense all important points in a small speech. You are an expert in that. Please try

that.

SHRI N.K. SINGH (BIHAR): But, Sir, there are two Bills and you yourself conceded

that you will have to speak promptly.

Sir, let me first begin by complimenting the Finance Minister in his sustained

endeavour to bring forth a Bill which was in the making for a long time. My problem with

the Bill is not so much about what it says, but what it fails to say, not so much for the

commission as perhaps the omission, not so much for what it does, but what it fails

to do.

Here are some of my concerns, Sir. First and foremost is my concern about the

timing of this Bill. The Finance Minister is aware that he had constituted a Financial

Sector Legislative Reforms Commission. This Commission has substantially completed

its work and will submit its report in March, 2013. Hopefully, this Commission will

amalgamate the plethora and multiplicity of laws and regulations which govern the

banking sector. So, my concern really is that if this Bill had to come forward today,

would it not have been better to bring this as part of the more holistic regulation which,

inevitably, the Finance Minister will have to bring before this House when he considers

the report of the FSLRC, to be submitted in March, 2013?

I have some other concerns on this Bill. The first one is the competition carve-out.

I am not quite clear whether it was useful to knock out the Competition Commission

and to substitute the Reserve Bank. All over the world, the practice is to have a

comprehensive regulation on competition and not leave these powers to the Central

banking agency. Why have we chosen to follow a somewhat different path?

54

My third issue, Sir, is the draconian powers which are now being given to the

Reserve Bank of India. The Reserve Bank of India have powers now to supersede the

Board of Directors up to 12 months and to appoint an administrator for managing the

company during that period. The Central Government has only to be consulted. There

are no other legal processes to be followed and we do not have recourse to a federal

deposit insurance corporation, which is the agency, an entity, for accountability

mechanisms all over the world.

My fourth point, Sir, is that whereas a forward step has been taken in regard to the

Cash Reserve Ratio of cooperative banks — because cooperative banks’ failures have

really conferred upon many of its deposit holders incalculable damage — the flexibility

given to the Reserve Bank to alter the Cash Reserve Ratio in respect of cooperative

banks, and to also alter some of the other parameters of supervision, is done in a

manner which may not be conducive to the overall working and health of the cooperative

banks.

My fifth point, Sir, is on the licensing provision of cooperative banks, that they can

now conduct the banking activity, without licence from the Reserve Bank, for one year,

being extended to three years. These societies have, in the past, performed badly, and

to protect the interests of their Members, this window should have been narrowed, not

widened.

SHRI N.K. SINGH (CONTD.): My sixth point really to the Finance Minister is that

the Bill does not address some of the issues of fair resolution mechanism because

dozens of cooperative banks fail every year and the depositors have to wait usually for

years before they can receive the payout from deposit insurance. An efficient resolution

mechanism would have protected them. My seventh concern is really the issues

concerning streamlining the legislative framework for public sector banks. Public sector

banks have a multiplicity of legislative ambit and, I think, there is a need to have one

comprehensive legislative framework governing public sector banks. My eighth point in

respect of this particular specific Bill is the issue of consumer protection. A

comprehensive ex-ante and ex-post system of consumer protection needs to be

enshrined in a banking law of the kind which is now before us.

Sir, I move on to a different kind of a subject. I move on to the subject that this Bill,

the Finance Minister knows, confers huge powers on the Reserve Bank of India. I have

the highest respect for the Reserve Bank of India. They have done a remarkable job in

times of regulatory uncertainties. They have invested confidence to our banking

community. I would like to remind the Finance Minister of a debate not so archaic which

55

existed on the amplitude of relationship between the Mint Street and the North Block.

And the balance of advantage in the nineties was considered that we need to shift that

fulcrum in favour of the Reserve Bank of India and that is what led to the enormous

autonomy which has been given to the Reserve Bank of India. How has this autonomy,

Sir, been used? The record in this regard, Sir, does not look to be a very laudable one.

To give you just one example — the licensing of banks. The Reserve Bank has issued

only 12 bank licences since the beginning of the reforms even while the number of

commercial banks has declined sharply from 301 to 169. In terms of penetration, India’s

loan-to-GDP ratio which was just 75 per cent happens to be 200 per cent in China; in

the case of Brazil, it happens to be over 300 per cent. We are nowhere, anywhere, on

the scale of developing countries on the penetration of loan per the population density.

Now, therefore, Sir, I submit to the Finance Minister that perhaps we have burdened the

Reserve Bank of India with too many functions. I submit to him the fact that there is an

inherent conflict in the discharge of these functions by the Reserve Bank. What are

these conflicts? There are three important conflicts which the Reserve Bank of India

faces in the discharge of its obligations. The conflict of formulating a monetary policy

which could be in conflict with the debt management strategy. The inherent conflict in

the monetary policy conflicts with banking regulations because if you want to cover up

your mistakes by setting interest rates too low to recapitalize the banks, you may make

the money available from borrowing from Reserve Bank at a low rate which could lead

to other consequences. The inherent conflict between debt management conflicts with

the banking regulation. Therefore, there is a need to relive these three inherent conflicts.

The Reserve Bank is troubled enough in managing what is classically called the

Impossible Trinity. Why burden the Reserve Bank with these three more difficult Trinities

to be able to reconcile? This is, therefore, Sir, the right moment for the Finance Ministry

to consider two things. Consider an independent debt management office and learning

from best international example of having a separate banking regulator, to be able to

perform some of these functions which have an inherent conflict. Hopefully, therefore,

the spirit behind the new regulation,which is to increase the penetration of banks to

have a greater banking network, can only be realized when you begin to divest the

Reserve Bank of these inherent conflicts currently embedded in the manner in which

this regulation is being proposed to be implemented.

Sir, I move on very quickly now to one other Bill which is before us. There I will be

brief. I have, Finance Minister, only three suggestions to make in respect of the other

Bill which is under consideration. First of all, I am wondering why you did not consider

the inclusion, under the Act, of the NBFC sector as recommended by the Thorat

Committee Report.

56

SHRI N.K. SINGH (CONTD.): In one second, Sir, I just want to bring to his kind

notice that I have before me the salient features of the recommendations of Usha

Thorat Committee Report. One of the very specific recommendations contained in

that Report, which the Reserve Bank of India released on the 29th August, 2011, is

recommendation No. 12, which specifically suggests that NBFCs may be given the

benefit under the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002. There should be, Sir, good reasons as to

why this was left out.

My second specific comment on that Act is whether the provision allowing

confession of debt to equity will result in the change of the status of the reconstructing

companies from secured creditor to an equity holder implying that this will have the last

charge on any of the proceeds recovered from the liquidation. The provision, however,

of allowing immovable assets of banks to purchase assets could lead to a situation

where the banks may pay a higher price to show a higher recovery rate understating

the quantum of the non-performing assets.

MR. DEPUTY CHAIRMAN: Now conclude.

SHRI N.K. SINGH: I will just need one or two minutes. I think I must commend the

Finance Minister, as I began by saying that the main Bill, which is the Banking Bill,

through which you seek to subserve many interests - enhancing regulation, allowing

economic ownership with voting rights, enabling greater supervision powers and

importantly, the preference share being counted towards Tier-II capital and Tier-I capital,

enabling greater compliance to the Basel-III norms which you are likely to apply - are all

steps in the right direction. But, I think, the agenda is incomplete. We require

comprehensive approach to address some of the issues which I have brought to your

notice.

(Ends)

57

SHRI BAISHNAB PARIDA (ODISHA): RAJYA SABHA

SHRI BAISHNAB PARIDA (ODISHA): Sir, many thanks for reducing the time. At

the outset, I must thank the hon. Finance Minister for paving the way for the foreign

capital to enter and influence our national economy. As everybody knows, the finance

capital is the greatest weapon in the hands of the monopolists and capitalists to not

only influence the economy of a country but also the politics of that country.

Fortunately or unfortunately, we have pushed ourselves into the trap of that

multinational capital or finance capital. Sir, through this Bill, we are increasing the

shareholders’ voting rights from 10 per cent to 26 per cent in private sector banks,

making investment attractive for foreign players.

Another clause of this legislation clears way for more corporate houses to run

banks by enabling the Reserve Bank of India to issue new bank licences. Sir, raising of

the voting cap will have a positive impact in attracting funds as it will help the foreign

investors to have more say in our banks.

The Bill will give RBI greater regulatory oversight over local banks and the ability to

overrule boards when the banks are facing financial difficulties.

Sir, by this way, through the Reserve Bank, we will have the foreign banks and the

corporate houses entering into banking sector. Sir, as my learned friend, Dr. Mungekar,

said, the banking policy and the banking system was adopted by this country under the

leadership of Shrimati Indira Gandhi. It gave a new opportunity to the economy of this

country, and the result of nationalization of banks is still being reaped by the ruling

class. But now by this Bill, we are denationalizing those nationalized banks.

SHRI BAISHNAB PARIDA (CONTD.): We are, in a way, inviting the foreign banks.

In other words, we are allowing the corporate houses of this country to establish new

private banks. (Time-bell) That way we are giving opportunity to the private players to

..(Interruptions)..

MR. DEPUTY CHAIRMAN: Paridaji, you had only three minutes. Please conclude

now. ..(Interruptions)..

SHRI BAISHNAB PARIDA: Just two minutes, Sir.

MR. DEPUTY CHAIRMAN: No, no. No more time please. ..(Interruptions).. We

have to finish it by 5.30 p.m.

SHRI BAISHNAB PARIDA: Sir, the policy of the State-owning banks ..(Interruptions)..

58

MR. DEPUTY CHAIRMAN: Okay, that is enough. ..(Interruptions)..

SHRI BAISHNAB PARIDA: That way India again is going back into ..(Interruptions)..

MR. DEPUTY CHAIRMAN: That’s enough. ..(Interruptions).. I told you to finish within

three minutes. Your time is over. ..(Interruptions)..

SHRI BAISHNAB PARIDA: Sir, I want to raise just one more thing. ..(Interruptions)..

MR. DEPUTY CHAIRMAN: No, please. ..(Interruptions).. The rest you can write to

the Minister. ..(Interruptions)..

SHRI BAISHNAB PARIDA: I am not going into this aspect. ..(Interruptions).. I am

going to talk about another aspect. ...(Interruptions)..

Sir, the Chief Minister of Odisha ..(Interruptions)..

MR. DEPUTY CHAIRMAN: I am helpless. ..(Interruptions).. We have to conclude it

now. ..(Interruptions)..

SHRI BAISHNAB PARIDA: Sir, the Chief Minister of Odisha complained many times

that the banks ..(Interruptions)..

MR. DEPUTY CHAIRMAN: It is the last day of the session. ..(Interruptions)..

Everybody wants to go. ..(Interruptions).. Paridaji, please. ..(Interruptions).. Now, Paridaji,

that’s over. ..(Interruptions)..

SHRI BAISHNAB PARIDA: They are disbursing only 30 per cent of the

..(Interruptions)..

MR. DEPUTY CHAIRMAN: Okay, that’s all. ..(Interruptions).. Shri Rajeev

Chandrasekhar, not present. ..(Interruptions).. Shri Ram Vilas Paswan, not here.

..(Interruptions)..

Shri D. Raja. ..(Interruptions)..

Yes, Paridaji, its okay. Shri D. Raja is the last speaker. ..(Interruptions)..

What can I do? I am equally helpless, as you are. It is the last day. Everybody

wants to go. We both are helpless.

SHRI BAISHNAB PARIDA: I am thanking you, Sir, for not giving me time.

..(Interruptions)..

(Ends)

59

SHRI TAPAN KUMAR SEN (WEST BENGAL): At the outset I want to place

before the hon. Chair that we are discussing the two Bills. We agreed to it on the

condition that reasonable time should be allowed but reasonability should be left to me.

..(Interruptions)... I rise to oppose the Banking Laws (Amendment) Bill, 2012. I think

there is no mincing of words. Our position is well known. I am definitely not alone in

opposing the Bill in this House. I represent the voice of seven lakh bank employees.

Today, employees of all affiliations, right, left and the centre have gone on strike to

protest against this retrograde Bill. I also seek to represent today the voice of 50,000

workers who are staging a protest in the Parliament Street, near the Parliament House,

opposing the very policies contained in this kind of Bill. There are differences in

perception and understanding. There is no doubt about it. Every day we are being

made conscious about that. We have heard the hon. Prime Minister addressing the

Annual General Meeting of the FICCI on 15th December, 2012. He said that whoever is

opposing the reforms of these kinds are the victims of the backward ideology. We

admit this certificate with all modesty. Let me tell that victims of the backward ideology

could create a condition by which the public sector banks structure could be protected.

During the period of the global financial meltdown, we remained comparatively insulated

from extreme economic crisis in which our country’s financial sector played a very

important role in keeping the national economy afloat.

Today the situation demands whether we will strengthen it further or we will gradually

weaken it at the behest of the State. I think this is precisely the premise on which

differences remain. These may continue to remain. The debate will go on.

Sir, I oppose the Bill. My previous speaker, Shri Bhalchandra Mungekar, adequately

elucidated the issue. I am afraid; he is also a victim of the backward ideology. He has

given certain quotations from his own experience. God forbid. Why are we opposing

this Bill? We are opposing it because the authority of the nationalised character of the

bank is being sought to be weakened by this process. There were reasons when banks

were nationalised. Certain restriction has been put in place for the non nationalised

banking sector that with different business interests they should not come into this

sector. My hon. friend, Shri Goyal has criticised that restriction. But there was a historical

necessity for such a restriction. We all know that bank’s capital is people’s savings

whether it is the public sector or the private sector. They don’t bring capital from

elsewhere. Their basic capital is people’s savings. People’s saving in a developing

country like ours must be channelised to national priorities, not to any individual business

man’s straight. I think that should be the guideline when we are allowing the private

sector to enter into the banking sector. On that premise precisely, I oppose the very

60

idea of promoting the private sector banking. So far as the coverage of the people by

the private sector banks is concerned, given the present situation, what is their role in

place? What is their role in reaching the rural populace?

What is their role in the priority sector lending? They are supposed to be governed

by the RBI guidelines. How are they complying with the RBI guidelines? If all this is

properly scrutinized, it is good. I think it clearly stands established that with the limited

role they are playing by collecting or attracting the common people’s savings in their

deposit and in their banking business, definitely they are not satisfying the national

priority compared to the role being played by the nationalized banks. So far as giving

loan or credit by the nationalized banks is concerned, definitely, there are many points

of criticism. But if we put in comparison, I think it is incomparable. Since this Bill

seeks to promote more private banks in the banking sector, seeks to liberalize as to

which business interest will be allowed to take up private banking and since the clarion

call of the senior Ministers of this Government is that the industrial houses should

open their own banking institutions, this Bill seeks to operate in this background.

We oppose this very perception. This is not in national interest, particularly, in an

economy where credit is a serious problem, particularly in an economy where

agriculture, being the house of more than 56 per cent of the population, two-thirds of it

is still out of any institutional credit and we can’t expect this from a private banking

institution. As my friend, Shri Piyush Goyal, has also pointed out even some of the

nationalized banks which give agriculture credit, although that credit is to be properly

scrutinized, you will find that in and around the cities big farm houses have attracted

those agriculture credit. Many figures are available.

Given that role and given that situation, there is absolutely no reason, no logic at

this time, to create further private agencies which will apportion at least a part of the

common people’s saving, which would otherwise go to the developmental channel, to

the private business channel and to speculation. There is absolutely no reason. That

is not in the interest of the country. I would humbly request the hon. Minister to reconsider

this. It is not in the interest of the country. Secondly, linked to this is the voting right that

is sought to be increased in the private banks for foreign shareholders. Sir, at present,

in the existing private banks of ours, the extent of foreign holding ranges from 24.2 per

cent to 68.5 per cent. There are different rates in different banks. If I am wrong

statistically, the hon. Minister will correct me. It is around 24.2 per cent to 68.5 per

cent, so far as the existing foreign shareholders are concerned. You propose to

make their voting right, which is presently capped at 10 per cent, to 26 per cent.

The original proposal was to make it proportionate. Subsequently, it was made

26 per cent.

61

(MR. DEPUTY CHAIRMAN in the Chair)

SHRI TAPAN KUMAR SEN (contd.): Definitely, it was in that direction. Now it is a

very clear situation. On this premise, when no more private sector banks

cannot address the interest of the national economy, this increase in the voting rights

in those private banks by the foreign shareholders can easily facilitate and lead to

cartels. Sir, 74 per cent FDI is already allowed in the banking sector. It will lead to

foreignisation or foreign takeover of the private banking sector. With the power they do

have, definitely, they will kill the space of the nationalized banking sector, the role of

which we still cannot ignore in the country’s national development, in funding our

developmental needs, in funding the real economy’s industrial needs. This is also

another danger. The increase in voting right will again do no good to the banking sector.

So we consider that this is also not a welcome step.

Thirdly, so far as nationalized banks are concerned, where the voting right was

capped at one per cent for private shareholders, — now, it is proposed to be

increased to ten per cent — I would draw the attention of the hon. Finance Minister to

a recent happening when a one per cent shareholder, a foreign company, of the Coal

India Limited, has threatened the Coal India with litigation stating that their entering into

Fuel Supply Agreement with power plants would undermine the profitability of the

company. When a one per cent owner of the shares threatened, the Government of

India was busy in explaining to them and persuading them. That is the situation in view

of the Investment Treaties that we have with different countries, and the obligations

flowing from them to protect the interests of foreign investors. If we, further, strengthen

the voting power of the foreign shareholders in public sector banks, that is destined to

distort the national priorities which the public sector banks are supposed to serve. So,

this is also another aspect which warrants that this provision be dropped. Please

don’t disturb our public sector banking network which has, successfully, worked, at the

time of global financial meltdown, to insulate our national economy from that disaster,

and which is, still, playing a very important role. Please don’t weaken them further. It

is not in the interests of the country. Sir, added to that, I would like to draw the attention

of the hon. Minister and also of this House to another aspect. Why should we promote

FDI at all in banking or in financial sector? I understand about promoting FDI in industrial

sector or in other productive sectors. In the service sector, that too, financial sector,

are they going to bring money from abroad to put into the capital of the banks? Bank’s

business is usually with the savings of the people. In the Indian soil, they will operate.

Their main operation is to collect the savings of the people and go in for financial business.

They are not going to bring a single paisa as capital from outside.

62

They will bring the seed money to get the licence and, thereafter, they will be

collecting people’s savings which is fairly high at 33 per cent. It is a very attractive

destination for all businessmen. Again, people’s saving, which is, basically, going into

the present structure of the banking sector towards national priorities, a big portion of it,

will be apportioned because you are giving a new licence to do the same job. They are

not going to bring a single paisa. So, I believe that in a financial sector business, there

is, absolutely, no reason for FDI because they are not going to bring real investment at

all excepting the initial seed money. And, on the same ground, I believe, the same

argument extends to insurance sector as well because in that sector also, they will be

collecting insurance savings. And, already, there are many things on record to show

the kind of black deeds. I also wrote, recently, to the hon. Prime Minister drawing his

attention to some of the misdeeds of private insurance companies. That apart, they

are not going to bring any money. Similarly, in the pension sector, when FDI was

coming, many people started discussing in the media, and I even heard a discussion in

a T.V. channel stating that after all, Indian workers were fortunate enough that the FDI

was coming to give them a better pension. In their countries, they are cutting their

pensions, and they are coming to India to rescue the Indian workers by giving more

pensions! We are allowing FDI in pension as well. Why are we having this FDI option?

In the Statement of Objects and Reasons of the Bill, it has been stated, “To ensure

Indian banking system to go as per international best practices...” Who will teach us

international best practices? Is it Lehman brothers and Citibank? We have banks of

the U.S.A and the Europe who are supposed to be the masters of the whole international

banking system.

SHRI TAPAN KUMAR SEN (CONTD.): In their country they made their bank

bankrupt by reckless speculation and got themselves bailed out from money from the

exchequer. If by chance Indian banks face such a catastrophe, is our economy in a

position, is it in competence to give a similar bail out package so that people serving in

that bank are kept protected? Can they do it? If they are to do it, what about the other

areas of economy of public exchequer? From whom should I learn? The writers of the

Basel norms have proved their competence in their own country by bankrupting their

own bank and by drawing from the public exchequer. Are they going to teach us? I

think Indian experience has generated well and I am fully in agreement with Mr. Mungekar

when he said that tremendous boost of the whole banking initiative, nationalisation of

banking and subsequently nationalisation of financial sector has given a tremendous

boost to Indian national economy. I think that is our main capital. We should strengthen

that. We should expand this base instead of weakening it. One thing which requires to

be done so far as the private banking is concerned, definitely, in banking interest, is the

present guideline of RBI should be much more streamlined, made much more stringent

so that any agency with different business interests must not be allowed to enter into

63

the field of banking. They are collecting people’s saving. They don’t have the right to

channelise that to their priority, ignoring the national priority. It will be done if agencies

with other business interest are allowed to come in the field of banking. Precisely, bank

nationalisation in 1969 has made an effective intervention in that process that big

industrial houses owning banks, channelize people’s saving to a different priority, to his

business priorities, not to expand the credit network. I think this is an important thing to

remember and learn and translate it into practice. So, I request the hon. Minister to

consider and reconsider that aspect. With these observations, I conclude on banking.

And as far as the other Bill is concerned...

MR. DEPUTY CHAIRMAN: That is very interesting.

SHRI TAPAN KUMAR SEN: I only need a few clarifications from him.

MR. DEPUTY CHAIRMAN: Tapan Kumarji, you have already taken double the

time.

SHRI TAPAN KUMAR SEN: No, no; not double time. (Interruptions) Anyway, on

this, I have a very few clarifications to seek. Firstly, the necessity of the Bill has emerged

from the requirement of the experience. Definitely, some steps need to be taken. But

here I have a clarification to seek. Number one is, through the Asset Reconstruction

Company, when you are trying to restructure the assets, are the banks losing money?

I have given a loan with interest. Some claim has come. Then through asset

reconstruction process, when finally settling in, are you sacrificing a part of the money

we have given? Bank is sacrificing because in the Statement of Objects and Reasons

of the Bill, it has been mentioned, there is some negotiation with the borrowers, and

some compromises to be drawn. So, that needs to be cleared. It needs to be cleared

whether we are sacrificing something and whether that amount of sacrifice is worth

sacrificing. The second thing is, this situation arises usually in the matter of big industrial

houses or big businesses. At the same time, when they are small retail borrowers and

particularly, borrowers in the MSME sector, they are also facing a serious problem.

How are you going to help them? I think they need a kind of favouritism. It is not an

absolute independent partiality. No. The situation demands it. The MSME are

responsible for employment generation in a big way and they are offering some livelihood

to people.

SHRI TAPAN KUMAR SEN (CONTD.): So, they need a special care. How are

you going to treat MSME while dealing with these issues? At present, the situation is:

This facility goes to them instead of individual debtor and MSME debtor. This favour is

64

not going to them. While dealing with the Bill, I would like to know whether you draw,

either under rules or something, certain special arrangements, particularly, for the MSME

debtors, because they are really in a dire state at a time when the economy is in

gloomy position. The big fish, somehow, manage by putting them into difficulty. One of

the major problems of the MSME sector is that they are mostly exploited by big industries.

They are the suppliers to them as ancillaries. So, they are exploited the most. That is

also one of the basic reasons. This adds to their indebtedness and their failure in

timely repayment. Otherwise, MSME sector’s track record has been very good. If you

scrutinize the overall NPAs — the hon. Minister will correct me if I am wrong — generated

by the business houses, the MSME sector is responsible for hardly 15 per cent. And,

the major failure percentage of the MSME sector out of this 15 per cent is due to not

getting the timely payment for the produce they have supplied to big industries. We

had also enacted legislation for addressing this problem. But, even after passage of

that law — that Bill was passed in my first year of entry into Parliament — seven years

ago, I think, the situation has not improved on the ground. So, this is also one of

reasons behind their indebtedness. I would like to know how the hon. Minister is going

to address this.

So, on this Bill, I seek these clarifications. And, the safeguards and some special

measures need to be made. With these suggestions, I conclude and reiterate my

strong opposition to these. I have already moved certain amendments to the Banking

Regulation (Amendment) Bill.

Thank you.

(Ends)

65

REPLY TO THE DEBATE in RAJYA SABHA

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM):

Mr. Deputy Chairman, Sir, at the outset, let me say that I regret that opportunity

was not available for many more Members and not enough time was available to

Members. Given the constraints of our parliamentary system and the fact that the first

part of the session was not a very happy part, I am afraid everybody has to bear the

pain of our own actions. Therefore, we are trying to pass this Bill today before the

House adjourns sine die. But I am grateful to the hon. Members. I think a number ofthem have taken enormous trouble to read the two Bills and to come up with manyconstructive suggestions and, in some cases, even to point out the direction in whichwe should go. I am fully aware of these concerns. This House is aware that we haveappointed the Justice Srikrishna Committee to look at all financial sector laws and tobring these laws in tune with modern times as required by a modern, open developingeconomy, and in line with similar regulations and laws elsewhere in the world. The draftof that report has come. At least one draft has come. Various stakeholders have beenasked to comment on the draft. Once we have a comprehensive report, we will certainlylook at these laws in a more comprehensive manner.

SHRI P. CHIDAMBARAM (CONTD.): For the time being, what we are trying to dois, literally, to fill the gap as we see it. In the working of these laws, there have beendifficulties. The RBI wants certain powers and, therefore, we are trying to fill the gapsand we have done our best. This is not something which I dreamt up in the last coupleof weeks. This has been in the works for several years. We have done our best. It hasgone to the Standing Committee; it has come back.

And, if there are still any deficiencies, I am willing to look into them. That is thepreamble.

Now, Mr. Goyal raised a number of issues. I am afraid, some of them are not

correct because they proceed on, perhaps, an erroneous reading of the provisions.

Firstly, let me deal with the general issues. There is no carve-out from the Competitive

Commission. That is one. That provision was introduced as an amendment in the

official amendments, but I withdrew that amendment. The Competition Commission

will continue to regulate anti-competitive practices; the RBI will continue to regulate the

banking side of these banks. There is no carve-out for the Competition Commission.

Secondly, we are not introducing a new class of shares because today banks have got

equity and preference shares. If we want to introduce a new class of shares, they must

be consistent with what the company law will eventually turn out to be. Since the

company law is also being amended comprehensively, we thought that this is not the

best time to introduce a new class of shares in banking. Let the Company Bill be

passed and then, we will adapt it to the banking laws.

66

Now, on supersession, yes, I know that the Standing Committee did recommend

that neither serving nor retired officer should be appointed. But, I discussed this with

the two Leaders of Opposition. Now, when we supersede a bank, if the Government

cannot appoint a serving officer or a retired officer, who does the Government appoint?

Then, Government has to appoint people who never had any connection with the

Government. That would be very difficult in these days. Because of the fiduciary

responsibility of administrators and directors, it is not as though we have a large pool of

non-Government people who would be willing to come and be administrator in a sinking

or collapsing bank. I have to necessarily fall upon either a serving officer or a retired

officer and I accepted that serving officer need not be appointed, but, I must have a

retired officer whom I can appoint overnight because I have to take over a bank. If I am

taking over a bank or superseding a board, we will probably do it on a Friday evening so

that on Monday, the bank opens with a new management, as we did in the case of

Global Trust Bank. I do not know why there is an impression that we are anxious to give

licences to big business houses. Nobody has made such a statement. All that we are

providing is that more licences should be given. That’s all. Who will get the licence, I

don’t know. Maybe, LIC Finance will get a licence. Maybe, LIC Finance could get a

licence. Maybe, one of our public financial institutions could mature and grow into a

bank. All that we are providing is that the guidelines for granting licences will be framed

by the Reserve Bank of India which shall be a fit and proper person. And a fit and proper

person alone will get a licence. I think, it is universally acknowledged that we need

more banks. Every day, we hear a cry that we need more banks. Yes, we are opening

more branches, but look at the pace at which we are opening new branches. At best,

we have opened 6,489 branches in the year 2011 - 12

That is an average of about 18-19 branches a day. We cannot open more branches.

Simply, we do not have the capacity to open more branches. We need more banks; we

need small banks; we need regional banks; we need banks with a national footprint.

And, let me repeat, we need two or three world-sized banks. China has got three banks

among the top 20. We have none. If there is a loan portfolio of Rs.6,000 crore, there is

not a bank in India which can take the entire portfolio in its books today. It has to put

together a consortium. So, we need more banks and all that we are providing here is,

a provision for licensing more banks. RBI will frame the guidelines. RBI is the licensing

authority. Government has no role to play in granting licences. Let there be no

misunderstanding that we have no bias in favour or against any one getting a banking

licence provided he or it is a fit and proper person.

Sir, there was some question about MSME sector. Firstly, MSME advances are

covered under the priority sector.

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SHRI P. CHIDAMBARAM (CONTD.): We monitor it closely. I have already held twomeetings in the last four months with Chairmen. We ensure that MSME is not starved

of funds. Secondly, the credit guarantee trust for MSME provides for guarantee of

collateral free loan up to Rs. One crore. The RBI has further mandated no collateral to

be taken for loans to MSMEs up to Rs.10 lakhs. The RBI has issued special guidelines

for hand holding and OTs of MSMEs. We encourage one time settlement for MSMEs.

The RBI has laid down guidelines and to nurture potentially viable sick units. These

guidelines were issued or amended in November, 012. So, we pay great attention to

the health of the MSME sector. I am aware it is the largest mployer, the largest exporter;

and I am aware of the importance of the MSME sector; and we will continue to nurture

the MSME sector.

Sir, couple of Members mentioned about corruption. We are treading here on egg

shells here If the officers and staff of banks are corrupt, I can only ask Mr. Tapan Sen to

take note of that. . I think we are treading on egg shells. I don’t think everyone is corrupt,

not all are corrupt. In fact, if all are corrupt, the banking sector could not have grown by

such leaps and bounds over the last 40 years. In fact, when the banks collapsed in the

United States and abroad, I want to pay tribute to our management, staff, clerks and

sub-staff of the banks, not one Indian bank big or small collapse. A thousand banks

collapsed in the United States, not one collapsed in India. I pay tribute to our Regulator.

I pay tribute to the management and staff of the banks. If there are black sheep, if there

are any, we must take action. I am sure, even as the management takes action, my

friend, Mr. Tapan Sen, will also impress upon the unions that they should not entertain

such black sheep. ..(Interruptions)...

Sir, Mr. Singh, raised a fundamental question why is the RBI being given so many

powers. Now, he has the liberty to raise the question. It will cause a stir, it will not cause

a storm. But if I reply to the question, it will cause a storm. Therefore, I shall not reply to

the question. If RBI was not the Regulator, we would still have to put in place a Regulator

with the same powers. The UK tried with an FSA. They found it not working. They have

withdrawn from the FSA; and they have restored powers to the Bank of England. In the

United States, there is a Regulator but the US Fed has equal and even greater regulatory

powers. They work in tandem. I agree that there are some problems about giving more

and more powers to the Reserve Bank of India. But, in the circumstances, I think, the

RBI is the best place to regulate the banking sector. I do not think at this stage of our

development we should experiment with any other banking regulator.

But I wish to draw the attention to Section 7 of the RBI Act. “The Central Government

may, from time to time, give such directions to the Bank as it may, after consultation

with the Governor of the Bank, consider necessary in the public interest.” The strength

of this Section is it has never been used. That is how it should be. We must have the

68

power, but we must talk to the Regulator, we must encourage the Regulator to regulate,

but we should not invoke this power. We must trust the RBI to regulate our banks well.

There was some reference about unhappiness in the industry; and they are going

on strike. I do not know why they should go on a strike. Frankly, there is no longer public

support for such strikes. ..(Interruptions)... I know that there can be a difference of

opinion on that. But let me given my opinion there is no longer great public support for

these strikes. Today, I have got the position as of 4.00 p.m. for all banks taken together,

all the officers are working; and all of them have risen to the ranks..(Interruptions)...

SHRI P. CHIDAMBARAM(CONTD.): Forty-six per cent of all the employees are on

strike and the worst affected, unfortunately, is the eastern part of India and the north-

eastern part of India. My regret is, the more economically deprived areas of India are

the ones that are affected. I think that any matter can be talked over. If the bank unions

want to talk to the IBA or the RBI or the Government, we are open to talk to them. But,

personally, I think in an industry like banking, resort to strike is not desirable. It is too

vital for our economy. Resort to strike is not desirable. I can only appeal that they

should not resort to strike. The only silver lining is, these strikes are becoming less and

less frequent. I compliment the unions that they are resorting to less and less frequent

strikes. But please don’t advise them to the contrary. My appeal to them is they should

not go on strike.

SHRI TAPAN KUMAR SEN: They go on strike when it is urgently required.

SHRI P. CHIDAMBARAM: A point was raised that why the NBFCs are not included.

That is not correct. The SARFAESI Act allows

NBFCs to be notified under Section 2 read with Section 45. We have, in fact,

notified, some housing finance corporations which are NBFCs under that. We have

the power to notify more NBFCs. As and when necessary we will notify more NBFCs

under the SARFAESI Act. I think I have dealt with most of the major points. I know I have

not dealt with some. But I have made notes. If there are any major points, I have not

dealt with, I will write to the Members concerned. I request the hon. Members to pass

the Bill. (Interruptions).

(Ends)

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MR. DEPUTY CHAIRMAN: I shall now put the motion regarding the

consideration of the Banking Laws (Amendment) Bill, 2012 to vote.

The question is:

That the Bill further to amend the Banking Regulation Act, 1949, the Banking

Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking

Companies (Acquisition and Transfer of Undertakings) Act, 1980 and to make

consequential amendments in certain other enactments, as passed by Lok Sabha,

be taken into consideration.

The motion was adopted.

MR. DEPUTY CHAIRMAN: I shall now take up Clause-by-Clause consideration of

the Bill.

In Clause 2 there is one amendment by Shri Tapan Kumar Sen and Shri P. Rajeeve.

Are you moving, Mr. Sen?

SHRI TAPAN KUMAR SEN: I am not moving, Sir.

Clause 2 was added to the Bill.

Clause 3 – Amendment of section 12.

MR. DEPUTY CHAIRMAN: Now I take up Clause 3. There are two amendments

by Shri Tapan Kumar Sen and Shri P. Rajeeve. Mr. Sen, are you moving your

amendment? Are you pressing?

SHRI TAPAN KUMAR SEN: Yes, Sir, I am pressing and so far as Clause 3 is

concerned, I move:

(i)That at page 2, for lines, 26 and 27, the following be substituted, namely: -

“Provided that the Reserve Bank may increase, in a phased manner, such ceiling

on voting rights from ten per cent to ten point one per cent”.

The question was put and the motion was negatived.

Clause 3 was added to the Bill.

Clauses 4 to 13 were added to the Bill.

MR. DEPUTY CHAIRMAN: Now I take up Clause 14. There is one amendment by

Shri K.N. Balagopal. Are you moving the amendment?

70

SHRI K.N. BALAGOPAL: Sir, now all the cooperative banks are coming under this.

In Kerala, there are more than 1,000 banks. In India, there may be 30,000 banks.

SHRI K.N. BALAGOPAL (contd.): All the banks are coming under this provision

and it will affect our co-operative credit system. We want some assurance from the

hon. Minister. Otherwise, the entire co-operative system will collapse.

SHRI P. CHIDAMBARAM: It is only when a co-operative society wants to do banking

that it requires a licence. It cannot do banking without a licence. That is the point we are

making. But when the RBI frames the guidelines, I will, certainly, convey his concerns

that there may be some safeguard.

SHRI RAVI SHANKAR PRASAD: That is our concern also.

MR. DEPUTY CHAIRMAN: Your concern will be conveyed to the RBI. The Minister

has given an assurance that your concern will be conveyed to the RBI.

Clause 14 was added to the Bill.

MR. DEPUTY CHAIRMAN: I shall, now, take up Clause 15 of the Bill. There are

two Amendments (Nos. 3 and 4) by Shri Tapan Kumar Sen and Shri P. Rajeeve. Mr.

Tapan Kumar Sen, are you moving the Amendments?

SHRI TAPAN KUMAR SEN: I am moving Amendment No.4.

SHRI TAPAN KUMAR SEN: Sir, I move:

The question was put and the motion was negatived.

Clause 15 was added to the Bill.

MR. DEPUTY CHAIRMAN: I shall, now, take up Clause 16 of the Bill.

There are two Amendments (Nos.5 and 6) by Shri Tapan Kumar Sen.

Mr. Sen, are you moving the Amendments?

SHRI TAPAN KUMAR SEN: Sir, I am moving Amendment No.6.

Clause 16 – Amendment of section 3

SHRI TAPAN KUMAR SEN: Sir, I move:

“That at page 13, lines 1 to 8 be deleted.

The question was put and the motion was negatived.

Clause 16 was added to the Bill.

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Clause 17 and the Schedule were added to the Bill.

Clause 1, the Enacting Formula and the Title were added to the Bill.

..(Interruptions)..

SHRI TAPAN KUMAR SEN: Sir, in protest, we are walking out.

(At this stage, some hon. Members left the Chamber.)

SHRI P. CHIDAMBARAM: Sir, I move:

That the Bill be passed.

The question was put and the motion was adopted.

(Ends)

MR. DEPUTY CHAIRMAN: I shall, now, take up the Enforcement of Security Interest

and Recovery of Debts Laws (Amendment) Bill, 2012.

The question is:

“That the Bill further to amend the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 and the Recovery of Debts Due

to Banks and Financial Institutions Act, 1993, as passed by Lok Sabha, be taken into

consideration.”

The motion was adopted.

MR. DEPUTY CHAIRMAN: I shall, now, take up Clause-by-Clause consideration

of the Bill.

Clauses 2 and 3 were added to the Bill.

MR. DEPUTY CHAIRMAN: I shall, now, take up Clause 4. There is one Amendment

by Shri Prakash Javadekar. Not present.

Clause 4 was added to the Bill.

Clauses 5 to 8 were added to the Bill.

MR. DEPUTY CHAIRMAN: I shall, now, take up Clause 9 of the Bill.

There is one Amendment by Shri Prakash Javadekar. Not present.

Clause 9 was added to the Bill.

Clauses 10 to 17 were added to the Bill.

Clause 1, the Enacting Formula and the Title were added to the Bill.

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SHRI P. CHIDAMBARAM: Sir, I move:

That the Bill be passed.

The question was put and the motion was adopted.

(Ends)

MR. DEPUTY CHAIRMAN: I thank all the Members who have cooperated in

reducing the time and ensuring that both the Bills are passed.