However, he added that discussions in this regard are still on and a final decision is yet to be taken.
Besides, PSBs are looking at hiving off non-core business, including insurance business to raise capital. The insurance joint ventures of PSBs, which are not listed, will be listed as it would bring in money to the bank. If the bank is not able to list, it can sell its stake or hive off to raise funds over a period of five years, he added.
PSBs are also considering monetising their real estate assets, Sandhu said, adding Bank of India has already approached the RBI for permission to monetise its realty assets.
On PSBs raising funds by tapping the capital market, he said, We have to look at the share value and what is the likelihood of it going up. Some banks like SBI are getting good valuation. The price to book value (ratio) of most banks is below one. We would like it to be a little higher.
If more retail investors hold shares, it will lead to greater financial discipline as well as more transparency, he added.
In his Budget speech on Thursday, finance minister Arun Jaitley had said that to be in line with Basel-III norms there was a need to infuse R2.4 lakh crore as equity by 2018 into PSBs. To meet this huge capital requirement, he said, it was important to raise additional resources.
While preserving the public ownership, with government holding at least 51%, the capital of these banks will be raised by increasing the public shareholding in a phased manner via sale of shares through retail to Indian citizens, he said.
In PSBs, the government's equity holding is between 56.26% to 88.63%. In SBI, it has 58.6% stake, while in PNB, it has 58.87%.
Sandhu said a strategy will soon be put in place to dilute government stake in all PSBs and bring it down to 51% in five years. All PSBs are likely to raise a total of around R1.2 lakh crore in five years by selling shares to Indian citizens.
Stake dilution will be done in many tranches after ensuring good valuation, he said. Each PSB is working on a strategy and timeline on government stake dilution. Hiving off non-core business and monetising realty assets to help PSBs raise around R1.2 lakh crore by 2019, he said. Budgetary support to PSBs the last option to help meet Basel-III capital requirements of R2.4 lakh crore, he added. In the interim Budget in February, the government had proposed to infuse R11,200 crore in PSBs.
Turning to the issue of providing greater autonomy to PSBs, Sandhu said the government is looking at providing a five-year tenure to CMDs. It is also looking at separating the post of CMD to chairman and MDs. He added that in order to strengthen the board, bringing in independent directors with domain knowledge is also being considered.
On financial inclusion, Sandhu said every household would be given bank account with a overdraft facility of R5,000 and RuPay debit card with inbuilt accident insurance cover of R1 lakh. It would particularly focus to empower the weaker sections of the society, including women, small and marginal farmers and labourers
Two bank accounts in each household are proposed to be opened which will also be eligible for credit, he said.