Govt now wants competition watchdog to okay bank mergers K. R. SRIVATS
collected from Business Line
NEW DELHI, AUG. 22:
In a policy U-turn, the UPA Government has decided to bring bank mergers within the purview of the Competition Commission of India (CCI).
It has now decided to drop a proposal in the Banking Laws (Amendment) Bill that would have taken bank mergers out of the ambit of the competition panel, a top Finance Ministry official said.
RBI VOICE
This will come as a setback for the Reserve Bank of India (RBI), which had wanted bank mergers kept out of the competition watchdog’s ambit.
This new thinking on bank mergers comes soon after the change of guard at the Finance Ministry where P. Chidambaram has taken charge.
If this decision is enacted into law, the RBI will not have the last word on bank mergers and acquisitions, as envisaged, sources said. “The entire para in the original Bill that brings bank mergers out of the CCI ambit will be deleted.”
The current thinking in the Finance Ministry is that the CCI, as competition watchdog, should get to approve merger transactions in all sectors, including banking, and that there should be no carve-outs or exceptions. Simply put, banks will have to take the panel’s approval before going ahead with any merger or forced amalgamation transaction.
All bank mergers will come under the scrutiny of the competition watchdog.
Ever since the RBI, as banking regulator, made a pitch for exempting bank mergers from the Commission’s scrutiny, there have been similar demands from other sectors, especially those such as telecom that have their own regulators.
Insurance and shipping players had also reportedly lobbied through their ministries seeking to be exempted from the panel’s scrutiny.
CALLS FOR EXEMPTION
The growing calls from industries to be exempted selectively from the scope of the competition law had irked Corporate Affairs Minister Veerappa Moily, who stressed the need for a competition culture in the country.
“If this trend of various ministries/industries seeking carve-outs were to continue, then there won’t be any need for a competition commission,” he had rued
Although Coalgate has completely stalled proceedings in Parliament, the Banking Laws (Amendment) Bill has been listed for consideration and passing for Thursday.
ABUSE OF POSITION
The Parliamentary panel that went into the original Banking Laws (Amendment) Bill, 2011 had supported the government’s proposal to keep bank mergers outside the CCI’s purview temporarily, but with certain caveats. It recommended that an exception should be considered only as a special case.
The CCI, which became fully functional in May 2009, is empowered (through Sections 3 and 4 of the Competition Act) to check anti-competition practices and abuse of dominant position.
It also has the powers to approve high-voltage mergers deals that could have bearing on competition in the market.
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