Govt committed to financial reforms

The government on Thursday committed itself to continue financial sector reforms by easing foreign investment policy, recapitalising state-owned banks and establishing a regulator for the pension sector.

"These (foreign capital) flows, especially foreign direct investment, need to be encouraged through appropriate policy regime," President Pratibha Patil said while addressing a joint session of Parliament.

She also underlined the need for augmenting resources of the banking and the insurance sectors "to permit them to serve the needs of society better".

The earlier UPA government could not pursue insurance sector reforms which included raising of the foreign direct investment (FDI) cap from 26 per cent to 49 per cent because of stiff resistance from the Left parties.

The bill to amend the Insurance Regulatory and Development Authority Act to raise FDI cap in the private sector insurance companies is pending in the Rajya Sabha.

"My government will recapitalise the public banks to strengthen their financial position and also bring legislation to establish a regulator for the pension sector," the President said.

The Pension Fund Regulatory and Development Authority (PFRDA) Bill needs to be re-introduced in Parliament as it lapsed with the termination of the 14th Lok Sabha.

The Bill was originally tabled way back in 2005 to replace the ordinance promulgated in 2004 for setting up the regulator.

Subsequently, the bill was referred to the Parliamentary Standing Committee after the Left parties opposed the legislation. The standing committee recommended the bill with some modifications.

But the amended bill could not be tabled in Parliament due to persistent opposition from the Left. As regards recapitalisation of public sector banks, the government has already announced capital infusion for four banks during the current fiscal.

These includes UCO Bank, Central Bank of India, United Bank of India and Vijaya Bank. Besides, other banks who need capital includes Dena Bank and Bank of Maharashtra. However, no decision has been taken so far.

The package is aimed to help these banks shore up their capital to over 12 per cent against various kinds of risks.

UCO Bank is expected to get Rs 750 crore (Rs 7.5 billion) next fiscal, while Central Bank of India and Vijaya Bank will receive Rs 700 crore (Rs 7 billion) each.