We may differ with RBI, but come to a consensus: D K Mittal

Interview with Secretary, Financial Services

Vrishti Beniwal / New Delhi Mar 22, 2012, 00:24 IST

People are bound to have different opinions in any system, but they ultimately reach an understanding, says D K Mittal, secretary, financial services. In an interview withVrishti Beniwal, he defends rumours about differences between the government and the banking regulator over issues ranging from new bank licences to bank account portability. Edited excerpts:

Some key financial-sector Bills will be tabled in this session. Can we expect these before the recess?
It will be difficult. But after the recess, certainly we would have the Banking Regulation Bill, Insurance Amendment Bill, Microfinance Bill, Nabard Bill, Sidbi Bill, NHB Bill and SARFAESI Amendment Bill in Parliament.

Would you go ahead with 49 per cent FDI in the insurance sector?
The standing committee has recommended 26 per cent FDI. Now this matter will go to the Cabinet and they will take a call on the ceiling.

What about the PFRDA Bill? Can you take it through when one of the UPA allies is opposing it?
There are concerns of certain sections of Parliament. Those would be resolved. They are before the government at the highest level. As of now, I’m not aware of some intense discussion on the subject. Some discussion has happened, but we have yet to be told about its finality.

Would the Microfinance Bill allow RBI to be the regulator for all MFIs, as suggested in the last draft?
It is the same draft that was published. The RBI will regulate microfinance activities of approved entities just the way they regulate NBFC and banking activities. If an entity is doing more than one thing, they will regulate the microfinance part. The Bill will be placed before the Cabinet, then it will go to Parliament, and then to a Standing Committee. So it is a long process. Everybody will get a second chance to comment upon it.

What happens to state laws on microfinance institutions when this Bill comes into force?
That is a constitutional issue which has been looked at. There is no constitutional overlap between the powers of the states and the Centre. That issue has been looked at by the law department and they are okay with the formulation what has been done. There is no intention to take away powers of the state governments, but the MFI activity which is being defined is fully in the domain of the Centre.

When is RBI coming with final guidelines on new bank licences?
RBI is waiting for passage of Banking Regulation Bill. When they have the comfort that there is enough regulatory authority to regulate new licences, they will do that.

Are there any differences between the finance ministry and RBI over issue of new licences?
RBI has always been saying it needs adequate powers by amending the Banking Regulation Bill and that then only it will give new licences. Differences of views do not mean differences of opinion. We are in a pluralistic society. There is always a difference of opinion because the perspectives are different, but we come to a consensus. Whether we change our opinion or they change, it doesn’t matter. Everybody should have a view. Here, the regulator has a different view, which is very natural to happen.

The RBI had reservations about bank account number portability. Have you reached a consensus?
Now all public sector banks have portability within their branches. In the second stage, we are looking at portability from one bank to another. Before that, we want to go for KYC registry. Then banks account numbering will have to undergo a change. We have already made a group on that and it is working on it. It may come within public-sector banks and I’m okay with that.

Which banks will benefit from the capital infusion programme and how will you provide the support?
We should know the names within a day or two. We are capitalising them by having preferential allotment of capital. When the time is mature, they can go for public issue and raise money from the market.

When will the holding company announced in the Budget, come into force?
That needs to be examined and taken to a logical conclusion if it is agreed that it is a good thing to do. In different countries, they have adopted this model. The private sector always has a holding company concept. They use it for acquisitions. The government has to decide about the format in which it should come. If it’s a company registered under the Companies Act, a law has to be framed and it will go to Parliament.

Iran has put in a request for setting up a bank branch in India. Are you favourably looking into it?
That is under the consideration of the government and RBI. We welcome every foreign bank. India has a WTO commitment.