Cabinet to decide on proposed bank holding company

According to government sources, the cabinet would consider the proposal for setting up a bank holding company for state-run banks soon.

The holding company is intended to enable state-run banks to raise capital from the market instead of seeking funds from the exchequer.

In order to meet the Basel III norms, state-run banks need Rs 90,000 crore equity infusion from the government, which owns 70 per cent of the banking system. Infusing this amount of funds would enable the government to retain its shareholding in the Public Sector Banks (PSBs) at the current level.

According to the proposed structure, 99 per cent of the government holding in the bank will be shifted to the Holding Company and the government will retain 1 per cent with itself so that it remains a state-owned bank, sources said.

Government plans to manage the company through 3-4 part-time officials, reports suggest. The 2012-13 Union Budget had proposed setting up of a financial holding company that would help raise resources to meet capital needs of state-owned banks.

The government in the Budget reiterated its commitment to maintain 58 per cent stake in state-run banks and announced Rs 15,888 crore capitalisation support to banks and financial institutions.