Lok Sabha on Tuesday passed the Banking Laws (Amendment) Bill, a development that will pave the way for comprehensive reform in the banking sector.

The Lower House of Indian Parliament passed the landmark Bill after Finance Minister P Chidambaram bowed to the BJP-led Opposition's demand to drop the controversial clauses that would have let banks to take part in futures trading in the commodities market.

Mr. Chidambaram said that he agreed to drop the clauses from the Bill as the Bill was very important for him and needed to enable India to create world-size banks.

Concluding the discussion on the Bill, he said, "India requires world-size banks. This Bill will help enable that. Of the top 20 biggest banks in the world, not a single one is from India."

The Bill is being seen as one of the Congress-led UPA Government's key reform measures. The Bill's passage will let existing banks to consolidate, and also let the Reserve Bank of India (RBI) to issue new banking licences.

The Bill also hikes shareholders' voting rights from 10 per cent to 26 per cent, which, according to the government, will encourage investors to infuse more capital into the banking sector.

In addition, the Bill will allow the central bank to supersede boards of private sector lenders and hike the cap on private investors' voting cap in public sector banks from 1 per cent to 10 per cent.