The Banking Amendment Bill, on Tuesday, got approval of the Lok Sabha after the government dropped the controversial provisions relating to allowing banks to trade in futures and keeping the sector outside the purview of Competition Commission.

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

The Bill, which seeks to strengthen banking regulation, was later passed by voice vote after the amendments proposed by the Left Parties were rejected by the House.

The Bill, along with the proposed legislations on pension and insurance, was one of the five key reform measures on the government’s agenda during the current session of Parliament. The government dropped the controversial changes in the Bill in deference to the wishes of the Opposition, the Minister said, adding that it had accepted all major recommendations of the Standing Committee on Finance.

On the proposal to allow banks to participate in the commodity futures trading, he said, it was based on the recommendations of the Standing Committee on Food and Consumer Affairs and the report of the Reserve Bank’s working group.

As regards other issues, he said, while the RBI would regulate the banking sector, the Competition Commission of India (CCI) would look into competition practices in the banking sector. The Minister also expressed the commitment of the government to infuse Rs.15,000 crore into public sector banks in the current financial year and retain their basic character.

The Banking Bill also seeks to raise the voting rights of investors in private sector banks to 26 per cent, from 10 per cent. It also allows the RBI to supersede boards of private sector banks and increase the cap on voting rights of private investors in PSBs to 10 per cent, from one per cent.

He said the Justice B.N. Srikirishna Committee had given its draft report and once the final report came, the government would come out with a comprehensive banking law.

On consolidation in the banking sector, Mr. Chidambaram said India would need 2-3 world-class banks and there would still be over 20 PSBs after mergers.

Private sector banks were growing, he said, adding there was no reason why the PSBs should not be encouraged to grow.

Describing the rising NPAs as a matter of concern, Mr. Chidambaram said, “This is not the time to tighten the screws. They are not wilful defaulters. This is the time to restructure loans.”

Rejecting the Opposition’s charge that ‘Manmohan-Chidambaram’ economic model was responsible for slowdown, he said, “Do not equate me with Dr. Manmohan Singh. He is a well known economist. I am not. I do not have his vast experience.’’