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Union Budget 2001-02 »
Finance Minister Speech : Banking Sector
Banking Sector
39. Banking sector reforms have proceeded apace in a phased manner over the past decade. However, the problem of non-performing assets with banks has continued. Special attention is being paid to recovery of NPAs:
lPublic Sector Banks have recovered Rs 800 crore of NPAs from 2 lakh accounts in 2000-01.
lNet NPAs as percentage of net advances were almost half at 7.4 per cent in 1999-2000 compared to 14.5 per cent in 1993-94.
l22 Debt Recovery Tribunals (DRTs) and 5 Appellate Tribunals have been established.
l7 more DRTs will be set up during 2001-02.
40. I also propose to bring in a legislation that will facilitate foreclosure and enforcement of securities in cases of default in order to enable the intitutions to realise their dues.41. In the light of new competition in the banking industry it is necessary to strengthen the management of the public sector banks. I propose to provide greater autonomy to bank managements. It is also essential to provide greater independence to bank managements in forming their own recruitment strategy and in implementing it. I therefore propose to abolish the Banking Services Recruitment Boards. This will be done in association with the Reserve Bank of India by July 31, 2001 or earlier. All future recruitments will be done by banks themselves.
Capital Account Liberalisation
42. Until about 10 years ago, all foreign exchange transactions were tightly controlled by the government and by the RBI. We have progressively loosened these controls and made the current account completely convertible. We have also liberalised the capital account for certain purposes. I propose to take further measures for liberalising the capital account. These are:
lIndian companies wishing to invest abroad may now invest up to US $50 million on an annual basis through the automatic route without being subject to the three year profitability condition.
lCompanies which have issued ADRs/GDRs may henceforth make foreign investments up to 100 per cent of these proceeds; up from the current ceiling of 50 per cent.
lCompanies with proven track record wishing to invest larger amounts may now get a block allocation in advance from the RBI for investments overseas.
lIndian companies that have issued ADRs/GDRs may acquire shares of foreign companies up to an amount of US $100 million or an amount equivalent to ten times of their exports in a year, whichever is higher.
lADRs/GDRs will be provided two-way fungibility. Converted local shares may be reconverted to ADRs/GDRs while being subject to sectoral caps, wherever applicable.
lIndian companies will now be permitted to list in foreign stock exchanges by sponsoring ADR/GDR issues against block share holding. This facility would have to be offered to all categories of shareholders. The Reserve Bank of India will be issuing these guidelines separately.
43. Investments by Registered partnership firms and companies providing professional services have not, so far, been permitted to make overseas investments. This ban is now being removed. Similarly, Indian employees who have the benefit of ESOP schemes in foreign owned companies can now make investments abroad up to US $20,000 annually instead of in a block of 5 years.
