The government may have to consider the Golden Share option in public sector banks to give them the leeway to raise additional capital from the markets. The proposal is one of the several being debated by the advisors to the government as part of the menu to strengthen the capital structure of these banks.

Golden share means vesting a share or a block of shares with extraordinary rights to block any move made by the management to change its structure, like transforming a public sector into a private sector one, even when the government has a minority stake in it.

The proposal is a re-run of a plan mooted by the earlier BJP government, as part of the dilution of government equity in the banks from 51 per cent to 33 per cent. However, an official source said no decision has been taken on the new plan as the government was mulling alternative options like permitting the banks to tap the resources of PSEs like LIC and UTI to finance their expansion. One of the options could also be to reduce government holding to 26 per cent instead. The government would still have the right to block special resolutions, the official added.

Experts said with the economy growing at 8-9 per cent per annum, bank credit growth would also cruise along at 24-25 per cent. This would force banks to raise additional capital to maintain their capital adequacy ratio norms. Arun Kaul, GM (treasury and finance), Punjab National Bank, however, said he was not sure if UTI and LIC would be ready to make any unduly large exposures to support additional capital requirements of public sector banks.

... contd.