Govt to placate RBI on bank mergers

Source :NEW DELHI:20 OCT, 2010, 06.41AM IST,ET BUREAU 


The government on Tuesday said it will take on board the concerns of the Reserve Bank before giving powers to competition watchdog Competition Commission of India for vetting mergers of banks. 

“It (the norms) is in the process, there is no intention to delay but these are government procedures that have to be followed. The finance ministry and the RBI have to be taken on board, as they have some issues which will be considered,” corporate affairs minister Salman Khurshid said here on the sidelines of a conference. 

The minister’s comments come in the backdrop of detail in the notification of certain provisions of the Competition Act in wake of opposition from the finance ministry and the RBI on certain issues. The provisions, Mr Khurshid said, are being looked into by the Committee of Secretaries. 

"It’s gone to the Committee of Secretaries. Once they give it, their comments and recommendations, we will take it up with the Cabinet," he added. 

The RBI has called for keeping bank mergers out of the jurisdiction of the competition authority, a suggestion that also has the support of the finance ministry. 

The banking regulator has argued that any other regulators will not appreciate the complexities in banks’ mergers. However, voices within the Commission have expressed concern that exempting one sector would lead to similar demand from other sectors. 

Although the CCI became fully functional in May 2009, provisions relating to clearance of mergers are yet to be notified. 

Currently, the regulator only has powers to check abuse of dominant position and anti-competitive agreements between companies. The ministry of corporate affairs has, in the new draft sent to CoS, reduced the timeframe for vetting of M&A proposals to 180 day from the 210 days specified earlier.


 Also , companies with a turnover of Rs 750 crore and above and assets worth more than Rs 250 crore would mandatorily need to come before the CCI. 

The minister had said earlier that amended Competition Act 2002 including the new provisions , would be placed before the Parliament in the monsoon session, a timeline which could not be met.