India's coalition government Wednesday introduced a draft legislation in parliament to reduce state equity in national banks to 33 percent from 51 percent despite protests from opposition parties.
The decision to introduce the bill followed an hour-long debate in which 209 members voted in favor and 159 against the introduction of the proposed legislation.
Opposition members from the main opposition Congress party and the communists said the Banking Companies and Financial Institutions Law 2000 was against public interest as it would clear the path for foreign firms to take over the banks.
They said the draft bill would be an escape hatch for loan defaulters who owed a combined sum of 580 billion rupees (12.50 billion dollars) to the banks.
Finance Minister Yashwant Sinha moved to allay fears saying the government would retain control over public sector banks "at all costs" and will not allow private firms to take control.
The bill has provisions to prevent any one group or individual from taking more than a one-percent stake in any state-run bank.
Despite the safeguards on controls, the law has encountered strong opposition from bank employees, who went on a countrywide strike last month fearing it would lead to privatization and job losses.
Banks in India were nationalized in 1970, but in 1994 the government approved the reduction of its equity from 100 percent to 51 percent, in line with liberal market reforms.
Six of the country's 19 state banks are still 100-percent government owned, having never taken advantage of the 1994 green light to reduce the state holding.
Most of India's state-run banks are in the red, which unions attribute to political interference and willful defaults by well-connected industrial houses -- NEW DELHI (AFP)
© 2000 Al Bawaba (www.albawaba.com)
