The Prime Minister's Office (PMO) is examining a proposal to replace the Banks Board Bureau (BBB) with a new body that would operate as a holding company to usher in reforms in public sector banks (PSBs). The latest move comes close on the heels of the massive Punjab National Bank (PNB) scam and subsequent clamour within the establishment for sweeping reforms in the banking sector.

According to top sources in the PMO, the Economic Advisory Council (EAC) has suggested that the BBB could be upgraded as a holding company for appointment of top bank officers in consultation with the Reserve Bank of India (RBI). The EAC has suggested that the new body should directly report to the PMO, and not to the Finance Ministry.

It is learnt that the EAC proposal titled ‘Continuing Reforms In PSBs for Better Performance’ is under active consideration of the PMO and a decision to upgrade the BBB is likely to be announced soon.

“ While setting up a new body as a holding company, the government would require to make an amendment in the ‘Bank Allocation Act, 1980. There are certain other suggestions that are being examined by the PMO,” sources further added.

A senior official in the government said the BBB that started functioning in April 2016 with primary objective of recommending names for top position in the government owned banks, was not able to act as a catalyst for reform simply because of the overstepping of Department of Financial Services in important matters and the autonomous body was not taken on board on several occasions in the past.

“Department of Financial Services had clipped the wings of BBB since the very beginning. The Department had shot down several powers, which BBB wanted to exercise in the top rank appointments in the bank,” the government official said.