New norms likely for top PSU bank posts

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The Banks’ Board Bureau is working to ensure that leadership roles in state-run banks would only be given to those with at least six years of service left, in order to ensure accountability of their actions, the organisation’s Chairman Vinod Rai said on Thursday.

Mr. Rai also said that public sector bank employees’ compensations would become more competitive in 2017-18, with increases in the variable pay component.

“An attempt will be made to introduce accountability in the system, to ensure that you appoint a whole time director or a CEO (chief executive officer) at an age where he has got a minimum of six years more to go in the institution so that he can be held accountable for the decision,” Mr. Rai said while speaking at an Assocham event.

The former Comptroller General of Accounts said that the main principle behind banking management should be transparency in the accounting process and transparency in the decision making process.

“In some ways the compensation package of these public sector institutions needs to be improved,” Mr Rai said while speaking at an Assocham event.

“We may not be able to do much about the fixed component but we can change the variable component. From the next financial year, we should be able to introduce bonuses, E-sops, and performance linked packages. The idea is to provide monetary and non-monetary incentives to attract professionals.”

Mr. Rai added that these incentives would apply to positions across all levels, not just to the middle and senior management.

Filling up vacancies

He also said that the Banks Board Bureau is in the process of filling up vacancies in the top management of the public sector banks.

“We are looking for the right people, and we are trying to ensure that we choose the best and not the second-best,” he said.

“We are in the business of trying to collate people who are from different walks of life and who will be willing to join boards of PSBs and be able to provide that kind of expertise which these banks have not had in the past and the effort is to ensure that it is these boards which run the banks.”

Corporate debt

Mr. Rai said that the Corporate Debt Restructuring Cell was created with noble intentions in the early 2000s, but it soon found itself unable to cope with the high volume of stressed assets in the system.

He said that while there were innumerable cases where project reports were inflated, balance sheets were manipulated and funds siphoned off, there was an equal number of cases where irresponsible or lazy lending took place, where due diligence was not performed and supervision was perfunctory.