What the Lok Sabha nod to Banking Laws (Amendment) Bill means

PHOTO: Associated Press

The government succeeded in moving ahead with its economic reforms with the Lok Sabha on Tuesday approving the Banking Laws (Amendment) Bill.

The Bill is expected to pave way for more foreign investments into the sector by increasing the shareholders' voting rights.

However, in its effort to enlist the Opposition's support, the government was forced to drop the controversial clause in the Bill that would have allowed banks to trade in the commodity futures market.

"The Bill is too important for me to pass. Therefore, I am bringing the Bill, dropping the controversial clauses," Finance Minister P. Chidambaram said while winding up the discussion on the Banking Laws (Amendment) Bill, 2011.

Here are some aspects of the Bill -

>> Banking Bill will increase shareholders' voting rights from 10 per cent to 26 per cent in private sector banks, making investment attractive to foreign players

>> Legislation clears the way for more corporate houses to run banks by enabling the Reserve Bank of India ( RBI) to issue new bank licences

>> Raising of the voting cap will have a positive impact in attracting funds as it will help foreign investors to have more say in banks

>> Government dropped a clause allowing banks to trade commodities futures amid fears it could lead to risky, speculative trading

>> Bill will give the RBI greater regulatory oversight over local banks & the ability to overrule boards when the banks are facing financial difficulties

>> Bill also enables the government to raise voting rights in state banks such as the State Bank of India to 10 per cent from the current one per cent, acceding partially to foreign investors' demands to have more say in Indian banking

>> Bill will allow foreign banks to convert their Indian operations into local subsidiaries or transfer shareholding to a holding company of the bank without paying stamp duty

With inputs from PTI

Will follow due process and compensate GMR as per law: Maldives official

Masood Imad, Media Secretary in the Maldives President's Office and a former
 Director of the Maldives Airports Company Limited (MACL)

B T :K.R. Balasubramanyam : December 19, 2012  | 09:22 IST


On December 8, the Maldivian government took control of the international airport on Hulhule island from a consortium led by the Bangalore-based GMR Group. Masood Imad, Media Secretary in the Maldives President's Office and a former Director of the Maldives Airports Company Limited (MACL), spoke to K.R. Balasubramanyam while on a visit to Bangalore. He stated that the Maldives government would compensate GMR in accordance with the law. Edited excerpts:
Q. Why is the Maldivian Government after the GMR Group's airport project?
A. When this so-called privatisation of the airport started, three entities bid for the project, including the GMR-led consortium. The technical evaluation process that followed did not qualify GMR for the project. But the technical evaluation committee, acted under pressure from the then president (Mohamed Nasheed) and qualified the GMR Group for the project. 

Later, when the deal was signed between the government and the GMR-led consortium, the commitment from the GMR side was to share one per cent of the airport revenue with MACL for the first 10 years, and 10 per cent of the revenues for 15 years thereafter. 

The government gave them the entire island of Hulhule and the vast real estate for commercial exploitation. GMR was also allowed to raise rentals to leaseholders. Yet the revenue share was so low. It was not seen as a fair deal at all. The contract was not acceptable to the public.

Q. What was your issue with the airport development charge?
A. One of the clauses introduced in the contract that MACL signed with GMR was to collect a $25 airport development charge (ADC) from every departing passenger. The International Finance Corporation (a World Bank affiliate) failed to notice that there was a legal issue in the collection of ADC.

The law of the land is clear that no taxes of any type can be levied on anybody in the country without the approval of Parliament. In this case, the ADC was sought to be levied without any legislative approval. And, this ADC was sought to be collected from passengers for the full lease period of 25 years, something not seen anywhere in the world. 

Q. Were there any other issues with the ADC?
A. The other issue was that there was already an ADC of $20 per passenger introduced by the previous president on tourists, called Tourism Goods & Services Tax. That meant an outgoing passenger had to pay $45 every trip. As you know, tourism is the lifeline of our country, and costs such as these could destroy our tourism economy. Hence, the $25 ADC was unacceptable. And, it was struck down. 

For the GMR Group, the Maldives business was the most profitable even without the ADC.

Q. What was the role of the previous government in signing the deal?
A. The then president surreptitiously signed the deal with GMR even as Parliament cleared a Bill which mandated that every case of large-scale foreign investment needed to go through it (Parliament). The then president had the GMR deal signed before giving his assent to this Bill. Our Constitution, of course, is clear that a Bill twice cleared by Parliament is law from the moment it is cleared, with or without the President's assent. Thus, what the then president signed (with GMR) was an illegal contract. The then president's handpicked board signed the contract with GMR.

Q. What is your response to the compensation claims? 
A. There are different types of figures in circulation. As far as the government is concerned, we will not stick to any of these figures. We have asked for an arbitration process to decide how much money we will have to pay GMR. We have appointed our side of the arbitrator. GMR is yet to appoint its side of the arbitrator. We will follow the due process of law and the government will give them as compensation whatever has to be given. It is not our intention to frighten foreign investors. 

Q. But doesn't this episode spoil your relationship with foreign companies?A. Our experience in partnerships with foreign companies has been good except with GMR.

Q. We hear there is a Chinese hand behind the exit of the GMR Group...
A. This is highly untrue. There is no Chinese hand of whatever sort. The GMR Group is spreading these rumours and creating a scare to spoil the excellent relationship between India and Maldives. In our country, GMR was seen as the equivalent of invasion by the Bohras in the early 1950s. This trading community invaded our country and posed a threat to the locals. And, they had to be evicted.

Q. Will your country's attitude to the GMR Group change?
A. It is a good company. The previous government used the company to push its own agenda. The company has built a good airport in New Delhi. In future, too, the GMR Group is welcome to bid for projects in Maldives. We have not blacklisted the company from doing business in Maldives. The only bone of contention between the government and the GMR Group was the contract on the airport

World Bank Group Announces Bertrand Badré as Managing Director for Finance and CFO

World Bank :December 18, 2012

WASHINGTON, December 18, 2012—World Bank Group President Jim Yong Kimtoday announced the appointment of Bertrand Badré as Managing Director for Finance and Chief Financial Officer. Badré, a French national, is currently serving as the Group Chief Financial Officer at Société Générale.

“Bertrand has deep management experience in some of the largest financial institutions in Europe, and he has a strong track record and sterling reputation,” said Kim. “I am very pleased to have Bertrand join the Bank’s management team, where I am confident he will continue to protect the Bank’s financial strength and maintain our ongoing commitment to effectively safeguard the resources entrusted to us. I also believe he will bring innovative solutions to the fiscal challenges in the developing world.”

Prior to joining Société Générale, Badré served as the Chief Financial Officer of Crédit Agricole SA from July 2007 to July 2011. He has also been Managing Director of Lazard and an advisor to President Chirac.

As World Bank Group Managing Director for Finance and CFO, Badré will be responsible for all critical internal financial functions and the General Services Department. This includes the Bank’s finance operations (corporate finance and treasury), control functions (risk and controller), and global partnerships and concessional finance.

Badré began his career in 1989 as Assistant Group Controller for BFI-Ibexsa, a Franco-American company that distributed professional electronic components now part of Avnet. From 1995 to 1999, in the Ministry of Finance he was charged with several control, audit and consultancy missions for the French National Audit Office. In that capacity he was seconded to the World Bank in Togo in 1997.

Badré later joined Lazard in London as Assistant Director in the Corporate Finance Division, and then went up the ranks becoming Vice President and later Director in Lazard’s New York office.  From 2004 to July 2007, he served as Partner and Managing Director of Lazard in Paris.

In 2002 he was a member of the global panel on “Financing Water for All” chaired by Michel Camdessus. He later worked with Camdessus as President Chirac’s deputy personal representative for Africa for the G8. He was then spokesman for President Chirac’s working group on new international financial contributions (the Landau report).

Badré has also served as a Director on a number of boards, including the Supervisory Board of Eurazeo between 2010 and 2012, Haulotte Group since 2005, various boards of the leading French regional daily Newspaper Group Ouest France,and represented Crédit Agricole and Sociéte Générale on the board of a number of their subsidiaries.

Badré is a graduate of HEC business school and of Institut d’Etudes Politiques de Paris. He is a former student of ENA and also holds a Master’s degree in History from La Sorbonne.

The appointment will be effective March 1, 2013.