Bill to amend Banking Act soon

A bill to amend Banking Regulation Act, which will enable RBI to lower the mandatory limits on statutory liquidity ratio for commercial banks, will be introduced in Parliament soon.

The government also intends to amend RBI Act to enable the central bank to lower the cash reserve ratio of banks from the present 3 per cent.

"We are ready with the bill. It will be introduced in the Budget session," Economic Affairs Secretary Rakesh Mohan said on the sidelines of a CII conference in New Delhi on Wednesday.

In his Budget, Finance Minister P Chidambaram announced amendments in Banking Regulation Act and RBI Act to give the central bank powers of revising SLR and CRR.

The amendments in legislation assumes significance as it would considerably free resources of banks and enable them to step up lending to industry, agriculture and infrastructure sectors, which in turn will spur growth in economy.

At present, it is mandatory for commercial banks to set aside 25 per cent of their deposits as SLR and another 3 per cent as CRR.

The amendment in Reserve Bank of India Act will also enable RBI to lend or borrow securities by way of Repo, Reverse Repo or otherwise.

The amendment in Banking Regulation Act will also enable banks to issue preference shares that can be treated as regulatory capital under specified circumstances as per Basel-II norms.

The bill also enables RBI to carry out consolidated supervision of banks and their subsidiaries.