The finance ministry has sought the central bank's views on the structure of a holding company for state-run banks to avoid regulatory issues when the model for the financial sector is adopted.
"The finance minister had also sought more clarity and hence it was suggested that consultations should be held with the RBI on issues such as equity structure, share-holding pattern and inter-linkages between banks, which may arise due to such a structure," a finance ministry official, who did not want to be named, said. Finance Minister P Chidambaram is expected to give approval for the holding companies after the Reserve Bank of India's suggestions have been incorporated in the proposed model, the official said.
The government is also working on how the non-operating holding company (NOHC) structure will repay debt in the event that the bank's dividend income is found to be insufficient. "That apart, we will have to make legislative changes. So we want clarity from the RBI on these aspects too," the official added.
Earlier, RBI governor D Subbarao had said that the government would have to allocate an extra Rs 90,000 crore over the next five years to meet the Basel III norms-rules framed to fortify the banking system after the global financial crisis-and if it wants to retain its 58% shareholding. In the budget for 2012-13, the government reiterated its commitment to maintain 58% stake in state-run banks and announced 15,888 crore capitalisation support.
The government may have to resort to direct infusion in public-sector banks for at least for one year, an RBI official said. "As Basel norms kick in, the government will have to convert its perpetual bonds and preference shares in state-run banks into equity," the official said.
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