The government has considered reviving the plan to create a holding company that will house equity stakes of public sector banks (PSBs), according to a report by Business Standard.
The proposal will meet the fiscal needs of 19 PSBs and improve human resource practices.
Two people familiar with the development said to the paper that, in a recent meeting with the finance ministry officials, the Prime minister Office (PMO) told them to look into the proposal based on the recommendation of a committee headed by veteran banker P J Nayak in 2014.
Moneycontrol could not independently verify the report.
However, the Department of Finance wants more time to study the proposal in detail, according to the report.
Suggestions from the P J Nayak committee were to form a bank investment company (BIC) that would hold equity stakes of PSBs. The stakes would be transferred in a phased manner to the BIC, making it the core investment company coming under the RBI regulations and having the characteristics of a sovereign wealth fund of a PSBs.
"A non-operational holding company - a model that has the approval of the RBI - for PSBs can aid recapitalization to a certain extent. The revenue stream for the holding company could be dividends and periodic sale of equity" said Ashvim Parekh, the managing partner of Ashwin Parekh Advisory Services, to the paper.
While the Nayak committee also suggests that the BIC should come under the Companies act and transfer power through "a suitable shareholder agreement and relevant memorandum and articles of association", such power requires legislative changes.
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