The Union Cabinet on Wednesday approved a clutch of decisions on the economic front and approved the Insurance (Amendment) Bill paving the introduction of the legislation in Parliament.
The bill seeks to raise the composite foreign investment cap in the sector to 49% from the existing 26% and is expected to have all the amendments approved by a select committee of Parliament. The bill is likely to be introduced in the Rajya Sabha on Thursday.
The insurance Bill has been pending in Parliament for several years and its passage is expected to attract foreign capital while strengthening the sector. It has been identified as one of the key reforms by the Narendra Modi administration and the parliamentary approval to the bill is expected to add to the reform credentials.
"The bill is aimed at removing archaic and redundant provisions in the relevant legislations and to enable the insurance sector to work for the betterment of the insured with greater efficacy," a government statement said.
The cabinet also allowed public sector banks to raise capital to meet their additional capital requirements under BASEL-III by diluting government holding upto 52% in a phased manner.
Out of 27 PSBs, the government controls 22 through majority holding. In the remaining 5 banks, SBI holds majority stake. These 27 PSBs control 70% of total branches, deposits and credit in the Indian banking system. The government has regularly been infusing incremental capital in the state run banks.
The total support provided to PSBs towards capitalisation during the last four years stands at Rs.5 8,634 crore. The provision for the current year is at Rs. 11,200 crore and the total market cap of government shareholding as on May 20 stands at Rs.4,19,711 crore.
If the PSBs are permitted to bring down GOI holding to 52% in a phased manner, they can raise up to Rs 1,60,825 crore from the market. The budgetary support needed for 2015-19 would be Rs.78,895 crore only, which will maintain government holding at 52%. However, as the government is likely to receive an amount of Rs.34,500 crore from PSBs as dividend, the net outgo will only be Rs.44,395 crore, the official statement said.
While permitting banks to raise capital from the market, the banks would be advised to preserve the government holding at minimum 52% and increase the public shareholding in a phased manner through the issue of shares largely to retail investors.
The cabinet also approved continuing the interest subvention to public sector banks, private sector banks, regional rural banks (RRBs), cooperatives banks and National Bank for Agriculture and Rural Development (NABARD) to enable them to provide short-term crop loans up to Rs 3 lakh to farmers at 7% during the year 2014-15.
"To provide additional interest subvention of 3% per annum to those farmers who repay on time, that is within one year of disbursement of their short-term crop loans taken during the year 2014-15," a government statement said.
The cabinet also approved providing relief to farmers affected by natural calamities, the interest subvention of 2% will continue to be available to banks for the first year on the restructured amount. Such restructured loans may attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.
The government has since 2006-07 been subsidizing short-term crop loans to farmers in order to ensure the availability of crop loans to farmers for loans upto Rs 3 lakh at seven percent per annum.
Among other decisions, the Cabinet also cleared an amendment to the Lokpal and Lokayuktas Act to enable of leader of the single largest opposition party in the Lok Sabha to be included in the panel to select Lokpal chairman and members. The amendment bill, which will now be brought before Parliament, will enable Congress leader in Lok Sabha Mallikarjun Kharge to have a say in the selection process in the absence of a recognised Leader of the Opposition in the Lok Sabha.
The bill seeks to raise the composite foreign investment cap in the sector to 49% from the existing 26% and is expected to have all the amendments approved by a select committee of Parliament. The bill is likely to be introduced in the Rajya Sabha on Thursday.
The insurance Bill has been pending in Parliament for several years and its passage is expected to attract foreign capital while strengthening the sector. It has been identified as one of the key reforms by the Narendra Modi administration and the parliamentary approval to the bill is expected to add to the reform credentials.
"The bill is aimed at removing archaic and redundant provisions in the relevant legislations and to enable the insurance sector to work for the betterment of the insured with greater efficacy," a government statement said.
The cabinet also allowed public sector banks to raise capital to meet their additional capital requirements under BASEL-III by diluting government holding upto 52% in a phased manner.
Out of 27 PSBs, the government controls 22 through majority holding. In the remaining 5 banks, SBI holds majority stake. These 27 PSBs control 70% of total branches, deposits and credit in the Indian banking system. The government has regularly been infusing incremental capital in the state run banks.
The total support provided to PSBs towards capitalisation during the last four years stands at Rs.5 8,634 crore. The provision for the current year is at Rs. 11,200 crore and the total market cap of government shareholding as on May 20 stands at Rs.4,19,711 crore.
If the PSBs are permitted to bring down GOI holding to 52% in a phased manner, they can raise up to Rs 1,60,825 crore from the market. The budgetary support needed for 2015-19 would be Rs.78,895 crore only, which will maintain government holding at 52%. However, as the government is likely to receive an amount of Rs.34,500 crore from PSBs as dividend, the net outgo will only be Rs.44,395 crore, the official statement said.
While permitting banks to raise capital from the market, the banks would be advised to preserve the government holding at minimum 52% and increase the public shareholding in a phased manner through the issue of shares largely to retail investors.
The cabinet also approved continuing the interest subvention to public sector banks, private sector banks, regional rural banks (RRBs), cooperatives banks and National Bank for Agriculture and Rural Development (NABARD) to enable them to provide short-term crop loans up to Rs 3 lakh to farmers at 7% during the year 2014-15.
"To provide additional interest subvention of 3% per annum to those farmers who repay on time, that is within one year of disbursement of their short-term crop loans taken during the year 2014-15," a government statement said.
The cabinet also approved providing relief to farmers affected by natural calamities, the interest subvention of 2% will continue to be available to banks for the first year on the restructured amount. Such restructured loans may attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.
The government has since 2006-07 been subsidizing short-term crop loans to farmers in order to ensure the availability of crop loans to farmers for loans upto Rs 3 lakh at seven percent per annum.
Among other decisions, the Cabinet also cleared an amendment to the Lokpal and Lokayuktas Act to enable of leader of the single largest opposition party in the Lok Sabha to be included in the panel to select Lokpal chairman and members. The amendment bill, which will now be brought before Parliament, will enable Congress leader in Lok Sabha Mallikarjun Kharge to have a say in the selection process in the absence of a recognised Leader of the Opposition in the Lok Sabha.
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