Sources close to the panel said the authority will be given fairly strong intervention powers to oversee the working of these weak banks.

The Verma panel is expected to submit its report by the second week of August. The original deadline for submission of the report expired on June 30. The panel will be unable to finalise the report by July-end as one of Indian Bank has yet to finalise its 1999 balance sheet.

The panel is also in favour of the government setting up an asset reconstruction company (ARC) instead of injecting money directly into the weak banks in the form of recapitalisation funds. According to the plan, the ARC can be directly set up by the government which can, at a later stage, sell the bad loans to private sector parties. It will also call for changes in the recoverylaw empowering ARCs to recover assets sold by the weak banks.

The panel, however, will not stipulate at what cost the assets will be sold to the ARCs. "Worldwide the realisation rate of bad assets is low.