Budget 2015: FM proposes setting up of autonomous banks board bureau

In order to improve governance of public sector banks, Finance Minister Arun Jaitley on Saturday proposed setting up autonomous banks board bureau for helping lenders raise capital for meeting expansion needs.

"The Bureau will search and select heads of public sector banks and help them in developing differentiated strategies of capital raising plans to innovative financial methods and instruments," he said while presenting Budget for 2015-16 in the Lok Sabha.

This would be a step towards establishing a holding and investment company for banks, he said.

This issue was discussed extensively at the Gyan Sangam addressed by Prime Minister Narendra Modi last month.

During the two-day bankers' retreat, heads of financial institutions have suggested the creation of Bank Investment Committee (BIC) and transfer of the government's investment in banks to BIC.

Creation of BIC would over time enable the government to reduce ownership to below 51 percent and help banks generate capital for growth.

In December, the government decided to permit public sector banks to raise up to Rs 160,000 crore from capital markets by diluting government holding to 52 percent in phases so as to meet Basel III capital adequacy norms. Public sector banks alone require Rs 2.40 lakh crore by 2018 to meet global Basel III norms.