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Indradhanush Scheme for Banks

Government of India’s 7 point reforms to revamp public sector banks and its performance.

Seven Colours to resurrect Public Sector Banks

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
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