It will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with issues of stressed assets. "As a first step towards a bank holding company that will hold all government investments in public sector banks, we had proposed a Bank Board Bureau and its structure will be announced," Finance Minister Arun Jaitley said at a press conference here.

"In the last few years, the public sector banks have faced challenging situation, partly on account of slowdown in some sectors. To resolve the current problem, you need to deal with the banks as well as the sectors themselves," Jaitley said.

Financial services secretary Hasmukh Adhia said the BBB would replace the existing appointments board for PSBs. "The BBB will also be a link between the government and banks and will be engaged with banks to evolve strategies for them," he said.

Jaitley has allocated Rs 7,940 crore in the budget for recapitalisation of public sector banks in this fiscal. The union cabinet had in December allowed state-run banks to raise up to Rs 160,000 crore from the capital markets by diluting the government stake in phases to 52 percent.

As per an estimate, public sector banks would need additional capital of up to Rs 240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.

The Reserve Bank of India said last month that state-run banks are adequately capitalised, but would need additional funds to comply with international capital adequacy norms in the future.


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