DNA Money Edit: Bank holding co can help reduce frauds

Finance minister Arun Jaitley recently said any decision to privatise public sector banks (PSBs) was challenging and would involve a very large bipartisan political consensus. True, the fraud at Punjab National Bank (PNB) has paved the way for an unavoidable debate on de-nationalisation of PSBs.

Also, it has reportedly forced the government to revisit its plans of setting up a bank-holding company. The holding company, first proposed by Jaitley in 2015-16 Budget, was scheduled to hold the government shares in PSBs and raise capital for them. The government set up Banks Board Bureau (BBB) in February 2016 as a precursor to a bank-holding company.

Faced with lack of the majority in Rajya Sabha, the government is waiting for the opportunity to clear relevant amendments to the Bank Nationalisation Act (BNA), which is mandatory to set up the bank-holding company.

The holding company is supposed to be run by bankers, and without any interference from their political masters and bureaucrats. It could divest stakes in PSBs as and when required and also recapitalise them, based on their provisioning and growth needs. While the formation of a holding company will not outright privatise PSBs, it will definitely help the government ride out of the criticism arising out of the latest banking frauds.