An RBI-constituted committee led by PJ Nayak in May 2014 had submitted its recommendations to improve the governance structure of state-owned banks and also to help private sector banks attract more capital.
Given poor asset quality and low productivity, either privatize PSU banks or transform governance structure to make them efficient
Reduce government stake in PSU banks to less than 50%
Remove dual structure of both Finance Ministry and RBI regulating PSU banks. Give all regulatory authority to RBI
Improve quality of PSU bank board discussions; focus on key areas like business strategy, financial reports, risk, and compliance
The government should transfer its stake in PSU banks to a holding company termed Bank Investment Company (BIC)
Government should reduce its stake in BIC to under 50% and appoint a professional management for BIC
For better accountability, BIC should be governed by The Companies Act 2013, and not the Bank Nationalisation Acts of 1970 and 1980
Ownership functions to be transferred by BIC to the bank boards. Appointments of directors, CEO to be the responsibility of bank boards.
Have uniform bank licensing regime across all broad-based banks, and niche licenses for banks with more narrowly defined businesses
Allow mutual funds, pension funds, PE funds to hold 20 percent in private sector banks, without having to take RBI approval
Allow promoter investors to hold up to 25% in private sector banks, against the 15% ceiling currently
Ensure a minimum five-year tenure for bank Chairmen and a minimum three year tenure for Executive Directors
Private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto 40% in distressed banks
Allow voting rights in proportion to the stake held
Bank officers guilty of ever-greening loans (offering new loans to repay old ones) should be penalized financially
