Thursday, May 18 2006 16:23 Hrs (IST) - World Time -

New Delhi: Parliament today (May 18, 2006) approved the long-awaited amendment to the RBI Act giving the central bank more flexibility to fix Cash Reserve Ratio, an instrument to regulate liquidity in the market.

The Reserve Bank of India (Amendment) Bill was passed by the Rajya Sabha by voice vote after virtually all sections supported the legislation. The bill was passed by the Lok Sabha yesterday.

At present, there is a floor of three per cent for CRR and a ceiling of 20 per cent. The amendment lifts both the floor and the ceiling for CRR enabling the central bank to fix CRR lower than three per cent.

Winding up the discussion, Minister of State for Finance P K Bansal said the bill was not intended to cover the entire gamut of economic activity, working of banks and taxation regime.

The bill also changes the definition of repo and reverse repo to bring about uniformity. It also provides for legal validity to trading in derivatives.

The changes in the bill were made in line with recommendations made by the Standing Committee on Finance, he said adding the bill is aimed at removing ambiguities and providing legal validity to transactions.

Regarding members' concern over the IPO scam, Bansal saidthe Government has taken certain determined steps.