Government of India’s 7 point reforms to revamp public sector banks and its performance.
Seven Colours to resurrect Public Sector Banks
- Appointments:
- The Government decided to separate the post of Chairman and Managing Director and there would be another person who would be appointed as non Executive Chairman of PSBs.
- This approach is based on global best practices and as per the guidelines in the Companies Act to ensure appropriate checks and balances.
- The selection process for both these positions has been transparent and meritocratic.
- Board of Bureau:
- The BBB will be a body of eminent professionals and officials, which replace the Appointments Board for appointment of Whole-time Directors as well as non-Executive Chairman of PSBs.
- They will also constantly engage with the Board of Directors of all the PSBs to formulate appropriate strategies for their growth and development.
- Capitalisation:
- As of now,the PSBs are adequately capitalized and meeting all the Basel III and RBI norms.
- However, the GOI wants to adequately capitalize all the banks to keep a safe buffer over and above the minimum norms of Basel III.
- Infusion of 25,000 crore rupees of capital into debt-laden banks in this fiscal in phased manner. Out of this 20,000 crore rupees would be injected in August 2015.
- De-Stressing PSBs:
- Projects are increasingly stalled/stressed thus leading to NPA burden on banks.
- In a recent review, problems causing stress in the power, steel and road sectors were examined.
- Pending policy decisions to facilitate project implementation/operation would be taken up by respective Ministries.
- Flexibility in restructuring of existing loans wherever the Banks find
viability. - Six new Debt Recovery Tribunals (DRT) to speed up the recovery of bad loans of the banking sector
- To develop vibrant debt market for PSBs in order to reduce lending pressure on banks. Strengthen asset reconstruction of companies.
- Empowerment:
- There will be no interference from Government and Banks are encouraged to take their decision independently keeping the commercial interest of the organisation in mind.
- Banks will build robust Grievances Redressal Mechanism for customers as well as staff so that concerns of the affected are addressed effectively in time bound manner.
- The Government intends to provide greater flexibility in hiring manpower to Banks.
- Framework of Accountability:
- A new framework of Key Performance Indicators (KPIs) to be measured for performance of PSBs.
- Streamlining vigilance process for quick action for major frauds including connivance of staff.
- Governance Reforms:
- The process of governance reforms started with “Gyan Sangam” – a conclave of PSBs and FIs organized at the beginning of 2015 in Pune.
- There was focus group discussion on six different topics which resulted in specific decisions on optimizing capital, digitizing processes, strengthening risk management, improving managerial performance and financial inclusion.
- Next Gyan Sangam will be held between 14 to 16 Jan 2016 to discuss strategy with top level officials.