Left being wooed on financial reforms

The government is set to push ahead with financial sector reforms in the coming days and is scheduled to take up the issue with the Left parties at the next UPA coordination committee meeting.

The finance ministry has prepared a note underlining the need for liberalisation of rules for the banking, insurance and pension sectors to push for 8 per cent GDP growth.

The government is in a bind, having introduced a Bill in Parliament to constitute a pension fund regulator and having also proposed doing away with the 10 per cent cap on voting rights on foreign investors in private banks. The proposals have been opposed by the Left parties and both Bills are pending with the standing committee.

Similarly, it has been unable to push the proposal to raise the foreign investment cap in insurance from 26 per cent to 49 per cent.

According to the course of action charted out by the finance ministry, it wants to ensure the three proposals are cleared by Parliament during the monsoon session, which is expected to commence on July 25.

On insurance, the government has decided to limit the amendments to the Insurance Act, 1938, only to provisions relating to the foreign investment cap. Officials said no decision had been taken on aspects like allowing separate health insurance players.

The United Progressive Alliance government will once again try to convince the Left parties on the need to shift to the new pension system as the Centre's pension liability has soared over the years.

The Left had expressed concerns about investments in the stock market but the government is of the view that the investments would be monitored by the regulator and subscribers can opt for a pure debt scheme.

Sources in the government told Business Standard that the note on banking reforms has listed out the unfinished agenda in the backdrop of high credit requirement to help in expanding the manufacturing sector.

It has also talked about the capital requirement for banks to be able to lend and has listed out the proposed roadmap charted out by the government.