New Delhi : To revive the fortunes of public sector banks, government today unveiled a seven-point plan encompassing Rs 20,000 crore immediate fund infusion, creation of a single holding company and minimising political interference. Announcing the revamp plan named ‘Indradhanush’ that also includes setting up of a Bank Board Bureau (BBB) for broad-level appointments and a performance-based monitoring mechanism, Finance Minister Arun Jaitley also allayed fears of any panic over mounting bad debts at the state-run banks.
Under the plan, asset reconstruction companies will also be strengthened to deal with bad loan situation. Moreover, the government has also resolved to set up a Bank Investment Committee, which will act as a holding company for shares on behalf of the government.
In order professionalise PSBs, the government also announced appointment of two private sector bankers to head Bank of Baroda and Canara Bank while also making appointments to three other large state-run banks from within the government sector.
Giving details of the seven-point agenda for revamp of PSBs, Financial Services Secretary Hashmukh Adhia said, “Many steps have been taken to reduce non-performing assets (NPAs) in power and state discoms.
Observing that the problem of the bad loans, which has remained unattended by the previous government, can be attributed to the slowdown in some sectors, Jaitley said that “even though challenging situation did exist, there is no cause for panic… cause for panic or alarm does not exist.”
Jaitley said “it was sectors such as steel, power, highways, discoms, to a lesser extent sugar, which were predominately responsible for the stress and therefore to resolve the whole issue and find a solution to this you need to deal with banks as an institution, you also need to deal each of these sectors.”
The government is continuously monitoring the situation as far as private sector power companies are concerned as also the discoms and some states have to have some urgent reform measures as far as discoms are concerned, he added.
On the proposed holding company, Jaitley said “as first step towards banking investment company, which will hold all share holding assets of the bank, we have proposed Bank Board Bureau (BBB).” The BBB is the interim arrangement till the holding company comes into existence because some of these functions will be get subsumed, he said. The bureau would get operational from April 1, 2016 and the members would be appointed in the next six months. The BBB would be headed by a professional.
On disinvestment of banks, he said, “that’s not the issue under consideration at this moment. Any divestment which is to take place while retaining the 52 per cent. A post capitalisation divestment is always a preferred option.” On the issue of empowerment, Adhia said the government has issued a circular that there will be no interference from the government and banks are encouraged to take their decision independently keeping the commercial interest of the organisation in mind.
Talking about framework of accountability, the Secretary said that a new framework of Key Performance Indicators (KPIs) to be measured for performance of PSBs is being put in place. “It is divided into four sections totalling up to 100 marks. The quantum of performance bonus is also proposed to be revised shortly to make it more attractive. We are also considering ESOPs for top management of PSBs,” he said.
Commenting on the seven-point agenda SBI Chairperson Arundhati Bhattacharya said these will reinvigorate the public sector banks and strategically enable them to take informed decisions in their quest for greater efficiencies. These steps are likely to alter the scope of the banking landscape in the country and enable it to realise potential hitherto unexplored, she added.
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WHO GETS WHAT
l The government has appointed Rakesh Sharma, currently head of Laxmi Vilas Bank, as the MD and CEO of Canara Bank
l M.O. Rego has been appointed the MD and CEO of Bank of India.
l P.S. Jayakumar appointed as MD and CEO of Bank of Baroda. He is currently MD and CEO of VBHC Value Homes Pvt Ltd.
l Usha Ananthasubramanian, currently chairman and MD of Bharatiya Mahila Bank appointed as MD and CEO of Punjab National Bank.
l Kishore Kharat Piraji has been appointed the MD and CEO of IDBI Bank.
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