PNB scam fallout: Govt is revisiting plans of a bank-holding company

PNB scam fallout: Govt is revisiting plans of a bank-holding company

 

New Delhi, Feb 26: In the backdrop of the Rs 114-billion fraud at Punjab National Bank (PNB), the government is revisiting plans of a bank-holding company.
Such a company will hold all of the Centre’s shares in state-owned banks and raise capital for them.
The holding company was first proposed by Finance Minister Arun Jaitley in his 2015-16 Budget. The Vinod Rai-led Banks Board Bureau (BBB) was set up in February 2016 as a precursor to a bank-holding company.
The ruling Bharatiya Janata Party and its allies (including Nitish Kumar’s Janata Dal-United) expected to be close to 100 seats in the Rajya Sabha in April — though still short of the halfway mark of 123 — policymakers in the government say there will be greater room for passing relevant amendments to the Bank Nationalisation Act (BNA), which will be required to set up a bank-holding company.
“The intention in the past few years has been to work on setting up a holding company. However, due to lack of a majority in the Rajya Sabha, there were other important Bills and amendments that had to be pushed through first, including the Insolvency and Bankruptcy Code, constitutional amendments to the goods and services tax (GST), and the GST Bill itself,” said a government official.
“After April, there could be a better chance to push the relevant amendments to the BNA, which will enable setting up a holding company,” the official said. Though the person did not provide details on a timeline or the structure of a holding company, the sense in the government is of the need for a professionally-run, quasi-independent holding company in which the Centre will have a majority stake but which will operate at arm’s length.
It will hold the Centre’s entire stake in listed public sector banks (PSBs), from 87 per cent in United Bank of India to 55.5 per cent in Union Bank.
Among the big state-owned lenders, the Centre owns 57 per cent in State Bank of India and PNB, and 59 per cent in Bank of Baroda.