BANK INVESTMENT COMPANY

BANK INVESTMENT COMPANY

Subject : Economics

Context : The government is likely to set in motion the process of establishing a Bank Investment Company (BIC) to hold its stake in public sector banks (PSBs).

Concept :

• BIC was mooted in RBI’s PJ Nayak Committee report in 2014.

Recommendations of the Nayak Committee regarding BIC

• Scrapping and removal of Bank Nationalisation Acts, SBI Act and SBI(Subsidiary Banks) Act
• Conversion of PSBs into Companies as per the Companies Act
• Formation of a Bank Investment Company/BIC under the Companies Act; transfer of shares by the central government in PSBs to the BIC
• BIC in turn would have over the controlling power to boards of PSBs
• Government will only control earning return on investment
• Fair return on investment to the Central government would be the responsibility of BIC
• Appointments of CEOs, Inside Directors and top Executives of PSBs would be the responsibility of the Bank Boards Bureau constituting three serving or retired bank chairmans and the government would not be involved in this decision in any way
• Nayak committee also recommends proportionate voting rights to all shareholders and reduction of governmental shareholding to 40%.