Advocating banking sector reforms, the Economic Survey today suggested allowing the public to hold

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greater equity in public sector banks and aligning of voting rights in banks with equity holdings.

"Align voting rights in banks with equity holdings. Allow public to hold greater equity in public sector banks within the policy of maintaining social control management," said the Survey tabled in Parliament.

The Survey also suggested passage of the Banking Regulation (Amendment) Bill 2005.

Noting that the credit market suffers from structural rigidities, the survey said, it may have been reinforced in the recent years due to a high credit demand encouraging the banks to raise deposits at higher rates for maintaining long term liquidity.

"These high rates have now come in the way of cutting lending rates at a pace which is consistent with the current outlook on inflation and the need for stimulating demand," it said.

Inflation in terms of Wholesale Price Index fell marginally to minus 1.3 per cent for the week ended June 20 against -1.14 per cent in the previous week.

Highlighting the performance of the banking sector during 2007-08, the survey said the gross non-performing assets of scheduled commercial banks as proportion of total assets declined to 1.3 per cent against 1.5 per cent in the previous year.