Suggesting a level playing field for financial sector entities, a government-appointed panel has made a strong pitch for converting the State Bank of India (SBI), the Life Insurance Corporation of India (LIC) and few other firms into ordinary companies under the Companies Act.

The existing laws which provide special privileges to entities like SBI and LIC should be either amended or repealed “to create a level playing field between regulated entities, irrespective of their ownership structure”, it said.

These recommendations form part of the Financial Sector Legislative Reforms Commission (FSLRC) report, which was submitted to Finance Minister P Chidambaram earlier this month.

Besides SBI and LIC, the other financial institutions which are governed by special laws include associate banks of SBI, EXIM Bank, National Housing Bank, NABARD, SIDBI and General Insurance Corporation.

“The undertakings of all statutory institutions should be transferred to ordinary companies incorporated under the Companies Act, 1956 and their regulatory treatment should be identical as that applicable to all other financial companies,” the FSLRC report said.

The legislative backing confers special privileges to such institutions, it said.
The existence of special law, according to the report, gives “an unfair competitive advantage in favour of LIC as many customers would tend to choose its policies over those offered by private insurers on account of the Government guarantee”.

The government had earlier converted financial institutions like IFCI, IDBI and UTI into companies under the Companies Act.