Chidambaram to push financial sector reforms

Thursday, 11 November 2004, 08:00 Hrs
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NEW DELHI: Finance Minister P. Chidambaram Thursday said a series of new legislation and amendments to some existing laws will be taken up during the winter session of parliament to further liberalise the financial sector.

Addressing a bankers' conference here, the finance minister also said the country's financial system must consolidate operations and warned that its high non-performing assets were eating into the profitability of the industry.

"The strategy should be to consolidate with entities that bring synergy, but not create banking behemoths," Chidambaram told the second and last day of Bancon 2004 conference, organised by the Punjab National Bank.

"The problems have to be tacked on several fronts. The credit quality must improve, banks should have better skills and the risk management system must be improved," he said.

The drop in non-performing asset ratio over the past couple of years, he said, could have been a result of the Indian financial system not adopting international standards.

He said some developments in the financial sector had forced the government to propose some amendments to legislations dealing with securitisation and reconstruction of bank's assets.

The legislative changes, he said, were aimed at preventing debtors from adopting measures that prevent speedy recovery of loans by financial institutions and banks.

He hoped these changes would be affected soon, adding that laws may also be enacted if the financial institutions do not adopt the central bank's code on fair practices for keeping the privacy of borrowers.

Meanwhile, speaking to reporters on the sidelines of the conference, chief executives of several banks said they would review their deposit and interest rates, even though Chidambaram had ruled out a revision earlier this month.

Housing Development Finance Corporation (HDFC) bank has already announced a hike in interest rates on long-term housing loans next week, while State Bank of India, ICICI Bank, Bank of Baroda and Corporation Bank are weighing similar options.

Source: IANS
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