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Govt rejects Nayak panel view of cutting govt stake below 50%

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New Delhi: The government today said it has rejected P J Nayak committee recommendations of lowering government holding in banks below 50 per cent even as it is considering other suggestion on providing greater autonomy.

“That particular part of the P J Nayak Committee has not been favourably considered because we want to keep the shareholding of the government at minimum 51 per cent,” Department of Financial Services Secretary G S Sandhu said.

“It has been clearly announced in budget also that the government wants to maintain public sector character of the banks,” he said on the sidelines of an event organised by PHD Chamber of Commerce and Industry here.


However, the government is considering issues related to greater autonomy to bank including raising tenure of Chairman and Managing Directors (CMDs) of banks.

“We are looking at providing longer tenure to CMDs. We are proposing five-year tenure. Then separation of chairman and managing directors. These are proposals yet to be decided,” he said.

Besides, he said, better quality of independent directors with domain knowledge is also one of the proposals for strengthening of board.

RBI set-up a committee under chairmanship of former Axis Bank chairman P J Nayak to Review Governance of Boards of Banks in India. It gave various recommendations including diluting government stake below 50 per cent.

On the capital raising issue, Sandhu said the Finance Ministry would come out with detailed blue print for disinvestment of the public sector banks in a month or two.

Public sector banks requires Rs 2,40,000 crore of equity capital over next 5 years to comply with Basel-III norms.

The government would disinvest in two or three PSU banks in the current fiscal itself, he said.

He also said that there is a proposal to create a asset reconstruction company (ARC) where some of these banks and the power companies can join hands and can set up a company that will revive incomplete projects and hand it over back to the promoter after revival.

“Similarly for the road sector there is a proposal from the National Highways Authority of India which we have welcomed. They also want to form an asset reconstruction company for the road sector. Because a large number of road projects they are incomplete…and they have not been put to commercial use,” he said.

“So with the help of ARCs these projects can be completed they can be put to commercial use and then money can start flowing back. That is another thing that we are looking at,” he added.