Addressing a news conference here today, the newly-elected CII president outlined the CII's agenda for financial sector reforms and said the government must immediately privatise at least five profitable banks to begin with and to the extent of 74 per cent disinvestment of equity.

Saying that the Indian industry has been handicapped by higher rates of interest, which is pulling down competitiveness of local firms, Bajaj said interest rates in India are uncompetitive because of 40 per cent of net credit being directed to the priority sector and high level of gross NPAs.

"Merging weak banks with the strong ones is not a panacea and may, in effect, weaken the stronger players. The need of the hour is to break the deadlock and start the privatisation process with profitable banks,"Bajaj said. He said over staffing of banks, high fiscal deficit, high government borrowings, high interest rates on small savings were also responsible for high level of interest rates in the country.

He said CII has set up a high-powered task force on NPAs headed by ICICI managing director & CEO K V Kamath and a report on how to address the problem would be submitted to a new government which would assume office in October. He said priority sector lending should be reduced to 35 per cent by 2000-2001 and to 30 per cent by 2001-2002 and capital adequacy ratio to 12 per cent by 2002. ``If government should subsidise priority sector, it should be done directly through budgetary support,'' he said.

Dwelling on debt recovery and bankruptcy, Bajaj said debt has become debased in India because not repaying in time or wilfully defaulting carries no real risk of bankruptcy.

He said poor foreclosure procedures and long drawn out bankruptcy processes encourage debt default which, in the long run, creates sicknessin the banking sector and chokes off funds for the entire industry.

While urging for a much faster and a more transparent bankruptcy laws, he suggested that the new sick industrial companies bill - which is still in the Rajya Sabha - be introduced as an ordinance ``as there has been political consensus on these issues.''

UTI needs corporate governance

MUMBAI: CII president Rahul Bajaj does not share Unit Trust of India's contention that board representation in companies should be granted where any equity holder commands over 5 per cent stake. "A five per cent holding cannot, by itself, make UTI nominees eligible for board representation in companies. It will depend on whether the institution can muster the necessary votes during the annual general meetings (AGMs) for installing its nominees on the board of companies. That would be corporate democracy,'' he added.

"Corporate governance has become the order of the day, and all companies including institutions like UTI should strive to achieve it.That the institution itself ran into serious problems with its flagship US-64 scheme, where investors chipped in thousands of crores of their hard earned money, is a pointer to the fact that the organisation needs to step up efforts to bring about better governance," Bajaj said.

"My feeling is that UTI was merely trying to get a feedback from companies on corporate governance, although I do not quite agree with their request for board representation. The UTI move created a lot of debate on the issue of corporate governance, and this I feel has been a healthy development," Bajaj said.