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Create Group Suggested Groups See All Suggested Groups AIPNBOA 1,373 members Join Bank Pariwar ( बाते आपकी हमारी ) Manohar Waghela joined Join PNB Officers 1,206 members Join AIBEA 6,806 members Join INTER SBI MARRIAGE BEAURO 3,407 members Join People You May Know See All People You May Know Bharat Rane 29 mutual friends Add Friend Arvind Solanki 10 mutual friends Add Friend Pc Mehta 11 mutual friends Add Friend Anil Kapoor 1 mutual friend Add Friend Pradeep Kelshikar 9 mutual friends Add Friend Recommended Pages See All Recommended Pages Divyabhaskar Vinay Phanse likes this. Like English (US) · Privacy · Terms · Cookies · Advertising · More Facebook © 2014 News Feed Shyamalan AS August 27 at 10:13am Recent cases revealing senior officials role in some bad lending decisions of PSU banks call for an urgent review of the selection process for top posts. The Nayak panel report could offer a start, says Shaji Vikraman Over seven years ago, when the name of an executive director was proposed for the post of the chief of a weak state-run bank based in east India, then finance minister P Chidambaram and department of financial services secretary Vinod Rai opposed it. For one, the official was low down on the list of eligible candidates. But, worse, there were many stories about his behest lending and sharp practices. Any resistance from the finance ministry, which has oversight over Indias state-owned banks, can be surmounted. The issue was later raised in the Cabinet and, finally, the executive got in. He went on to head a large financial institution in India, which is yet to recover from the scars inflicted by him. Unlike Syndicate Bank CMD SK Jain, who was arrested by CBI on graft charges, the bank official went scot free. An almost similar scenario played out a few years ago in another state-run bank. The chief of a bank in the South briefed his finance ministry bosses about reports that his deputy -again an executive director -had been pushing loans for borrowers with dubious records. The department of financial services, officials say, served a charge sheet against this well-connected banker, only to be told by another arm of the government -the department of personnel and training -that it had no business to discipline the official. The banker was then appointed as head of a medium-sized bank. The official left a mess behind, and an embarrassed UPA government was forced to clean it up in its dying days. In a recent instance, there were reports of a candidates name being inserted in the final appointment proposal after a top business house, which has a huge pile of bad loans, pushed his case. One of those who failed to make the cut protested in writing to the bosses in the finance ministry only to be shooed off. There have been many such cases over a good part of the last decade. Some of it is blowing up now probably because bad lending decisions in the sunshine days of 2004-05 to 200809 and later are starting to show up.It may also have to do with a change in government in New Delhi. Predictably, the Central Bureau of Investigation, dubbed a caged parrot, has waded in and is now straining at the leash, questioning the credibility of the selection process of chiefs of state-run banks at a time its own credibility is on test, having closed a couple of cases after tom toming them initially . It is easy to blame the malaise on wicked politicians, industrialists who have a stake in such appointments and pliant officials. The Nayak committee, which reviewed governance of bank boards earlier this year, said the boards are disempowered and the selection process for directors is being compromised. That means weak board governance. The committee reckons only radical reforms will work. Its blue print envisages bank boards being chosen by a Bank Boards Bureau comprising former bankers and then the bank boards themselves approving the selection process for CEOs. It also suggest a longer tenure for the CEO -which the finance ministry is also talking of now. On paper, it would be difficult to find fault with the selection process given that those who are part of it, including the secretary in charge of financial services and management professors from elite institutions, are not those who will just play ball. In almost all cases, vigilance approval also comes through. The question then is whether political pressure comes after that or before the final hurdle, forcing the leadership to settle for sub-optimal choices. Officials recount the appointment process for one of Indias top five banks. Only one banker was found eligible but five obtained Chief vigilance Commissions approval. Similarly there was considerable pressure in the early days of UPA -1 when the CMDs job at one of Indias top banks was up for grabs. In the face of opposition from the banking regulator a compromise was arrived at -the second candidate was appointed to a large bank. It is not as if the head of the government, his cabinet colleagues and senior officials do not have the answers. State-owned lenders and other institutions offer an opportunity for the ruling regime to provide patronage and grease political wheels. That also means stuffing the boards with cronies and some professionals who bankers swear are worse than middle-men. The bottom line is political will. It is easy for commentators to suggest that getting the government off the back of state-owned banks is the obvious solution. Offering longer tenures and operational freedom to the top deck should help, as also casting the net wider, including the private sector, for bank CEOs and more professional bank boards. With due respect to bankers, few acknowledge the fact that, may be, many of the current crop of bankers in state-owned banks arent good enough for the top job. The ban on recruitment in banks in the 1980s after a policy decision appears to be hurting as it has ended up shrinking the talent pool. This is not to say that their private peers are the epitome of professionalism and efficiency. It is the operating environment provided to them that makes the difference. The radical reforms the Nayak committee talked of has come at an opportune time. The Modi government has the numbers and some would say the resolve to carry out the required surgery. It will mean leaving the job of choosing the best person for the jobs in a transparent manner to an independent body with the regulator just looking at the fit and proper criteria. That would mean ceding a lot of power and passing up an opportunity to exercise clout. Institution building is much about processes, top quality personnel who steer the ship and the ability to make an impact from bottom up. Indias banks cannot be rebuilt just by addressing the challenges at the top deck. A cultural shift or transformation right from the bottom of the banking pyramid also will have to follow if organisational goals are to be achieved. It cannot be in isolation. The costs of not addressing these challenges will be very costly.
Posted on: Fri, 29 Aug 2014 04:19:52 +0000
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