Banks Board Bureau to discuss capital, consolidation today

Bureau is a temporary arrangement to be transitioned into a Bank Investment Company that would act as a holding company for all PSBs

The four-member Banks Board Bureau (BBB), with former Comptroller and Auditor General Vinod Rai at the helm, will hold its first meeting at the Reserve Bank of India (RBI) headquarters here on Friday. They’ll discuss a range of issues, including board-level appointments in public sector banks (PSBs) and consolidation among these lenders.

The bureau is a temporary arrangement, to be transitioned into a Bank Investment Company (BIC), that would act as a holding company for all government-owned banks. The BIC, which could have a varied shareholding, will also be responsible for capital infusion in PSBs.

Rai, present at the Singapore Symposium 2016 here on Thursday, declined to discuss BBB with reporters. Its formation was announced in the Union Budget of 2015-16. The concept of a bank-holding company was first mooted at the Gyan Sangam banking conclave in January last year. The government later clarified that BBB would be the first phase. Besides Rai, the others selected are H N Sinor, a former joint managing director (MD) of ICICI Bank; Anil Khandelwal, former chairman and MD of Bank of Baroda, and Roopa Kudwa, former chief of rating agency CRISIL. Ex-officio members include the central government’s financial services secretary, the secretary, public enterprises, and a deputy governor of RBI. All appointments are part-time.

According to sources, BBB is likely to operate from Mumbai. The idea is that it would not be so affected by central government influence. However, the full-fledged BIC could be based out of Delhi.

PSBs have a lot of bad debts, lowering their profitability and eroding their capital base. RBI’s asset quality review exposed further bad debt and banks reported ugly numbers in their December quarter results. Punjab National Bank, for instance, showed a 93 per cent decline in profit after provisioning for these, and non-performing assets rising to 8.5 per cent of all loans. State Bank of India saw 62 per cent decline in net profit and fresh slippage of Rs 20,700 crore. Finance Minister Arun Jaitley in Budget 2016-17 said the government was moving towards privatising IDBI Bank. Capital infusion of Rs 25,000 crore in 2015-16 was also not enough for the 22 PSBs. The bureau is expected to discuss a way forward.

IMPROVING GOVERNANCE AT PSBs

FOCUS AREAS

• Make board-level appointments
• Engage with bank directors to craft specific strategies
• Help in firming up capital-raising plans
• Advice on consolidation, including mergers in PSB space

BBB AT A GLANCE

• A seven-member body, including Chairman Vinod Rai
• Announcement made in Union Budget 2015-16
• BBB is an intermediate step towards forming holding company for banks

FRIDAY’S AGENDA

• MoS Finance Jayant Sinha & RBI Governor Raghuram Rajan to address bureau
• Discuss theme and priorities
• Setting ground rules for activity