FM's Review of Public Sector Banks' Performance

Restore trust in banking system

This refers to the report “Government unhappy with public sector banks’ recovery record” (Business Standard, June 4). The message sent to banks by Finance Ministry, just before the meeting of PSBs convened by FM scheduled on Monday, June 6, looks ritualistic. Beyond admonitions like this by publishing scary statistics, it is time all stakeholders of the Indian Banking System (private sector banks included) sat together and seriously deliberated about measures needed to restore the health of the institution of banking which has a major role to play in promoting economic growth.
Post-independence, India has been lucky in ensuring sustainability of major pillars of governance conceived in the Indian Constitution. These are legislatures, judiciary, executive and the institution of CAG. Among regulators, Reserve Bank of India(RBI) the financial sector regulator has played a significant role in nurturing the banking system by effective participation in institution-building and preventing bank failures. At this stage of development, health of public sector banks with more than two-thirds share in banking business need to be restored in national interest. Here, RBI and PSBs need legal and moral support from GOI. Such support is additional to the role being played by GOI as ‘owner’ and will include:
i)                   Level playing field for PSBs in the matter of recruitment, training, career progression and remuneration package for staff as compared to major ‘successful’ private sector banks.
ii)                Board being professionalised.
iii)              Transparent incentives and disincentives for executives and middle management professionals. Their survival and career progression should be dependent on performance (now they are not)
One wishes, this time, FM and his executives spend more time listening to CEOs of PSBs.
Coincidentally, June 6, 2016 happens to be the 50th anniversary of rupee devaluation. Let this day of sixes herald a new era in India’s banking history.

M G Warrier, Mumbai


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