The government is likely to consider within a few weeks a proposal for setting up a holding company for public sector banks to enable them to raise capital from the market instead of seeking funds from the exchequer.
"We are moving to Cabinet for setting up a holding company for the public sector banks," said an official source.
It will take 2-3 weeks. There will be one holding company for all public sector banks, sources said.
They said the Law Ministry's opinion has been sought for making legislative changes as various acts will have to be synchronised and amendments will be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980.
Besides, State Bank of India [ Get Quote ] Act 1955 and SBI Subsidiaries Act 1959 will have to be synchronised with the holding company structure.
"Law Ministry has to vet the proposal first. Then it will go to cabinet." the source said.
As per the structure proposed, 99 per cent of government holding in the bank will be shifted to the Holding Company and the government will retain 1 per cent with itself so that it remains a state-owned bank, sources said.
The company can be managed by 3-4 part-time officials, they added.
The Budget 2012-13 had proposed the setting up of a financial holding company that would help raise resources to meet capital needs of state-owned banks.