New Delhi: Attempts to enact an enabling provision, in order to reduce government holding in nationalised banks to below 51 per cent, have finally been dropped.

Moving a bill in the Lok Sabha on Tuesday seeking higher government representation on bank boards and setting up of a financial restructuring authority (FRA) for troubled banks, finance minister, P Chidambaram, said that the proposal that would have allowed Government holding to fall to as much as 33 per cent has been dropped.

The National Democratic Alliance (NDA) government originally mooted the move. However, the bill lapsed due to dissolution of the 13th Lok Sabha.

"The amendment relating to reduction of prescribed minimum shareholding of the Central Government in nationalised banks from 51 per cent to 33 per cent as mentioned in the earlier Bill has been omitted in the amendments proposed in the present Bill," Chidambaram said in the statement of objects and reasons of the bill.

Barring the deletion of the clause on government holding and inclusion of the clause to give the Centre greater representation on the bank boards, the amendments proposed in the Bill are largely on lines of the Bill of December 2000.

The Bill provides for equitable representation of Government directors on the bank boards by reducing the maximum number of directors elected by shareholders other than the Government from six to three.

This would enable the Government to have higher representation on the bank boards commensurate with its shareholding.

It has been stated that out of the 19 nationalised banks, the Government's holding in 15 banks that have accessed the capital market ranges from 51 per cent to 77 per cent. In the other four banks, its holdings are 100 per cent.

It is also being proposed to increase the number of whole-time directors from two to four. Moreover, the provision of mandatory nomination of directors by the Reserve Bank of India and financial institutions is being omitted, while the RBI would have powers to appoint one or more additional directors whenever the regulator senses that a bank has run into trouble.

An amendment is also being proposed to ensure that non-official directors in institutions such as SBI, DICGC, NHB, and Exim Bank will vacate office after the expiry of three-year tenure whether a successor is appointed or not.