Ex-CAG Vinod Rai to head Banks Board Bureau

Three members also appointed; all 4 appointments part-time

The government on Sunday announced the appointment of Vinod Rai, former Union comptroller and auditor general, the first chairman of the proposed Banks Board Bureau (BBB).

The appointment came about 32 months after Rai retired as CAG, a stint during which he exposed major scams under the previous United Progressive Alliance (UPA) government.

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• Vinod Rai to be chairman of newly constituted Banks Board Bureau

The government also appointed three expert members and as many ex-officio ones. None of these are full-time appointments.

BBB is meant to select heads of state-run banks. Also, to help these develop innovative financial methods to raise capital, including mergers and acquisitions. It will be operational from April 1 and will replace the existing appointment boards for selection of public sector bank (PSB) heads.

"With a view to improve the governance of Public Sector Banks(PSBs), the government had decided to set up an autonomous Banks Board Bureau. The Bureau will recommend for selection of heads - public sector banks and financial institutions - and help Banks in developing strategies and capital raising plans," an official statement said.

The approval for Rai and six others for the BBB comes when PSBs are struggling with a high and rising level of non-performing assets (NPAs) and with capitalisation concerns. The collective gross NPAs of state-run lenders are approaching Rs 4 lakh crore.

Besides Rai, the others selected are H N Sinor, a former joint managing director (MD) of ICICI Bank; Anil Khandelwal, former chairman and MD of Bank of Baroda, and Roopa Kudwa, former chief of rating agency CRISIL. The appointments are for a two-year term. Besides the three experts, the board will also comprise three ex-officio members - the department of financial services secretary, the department of public enterprises secretary, and a deputy governor of RBI .

Rai, a 1972-batch IAS officer from the Kerala cadre, was awarded the Padma Bhushan this year. He'd made the news for exposure of financial irregularities in the telecom spectrum allocation and coal mine allotment, among other things, during a five-year tenure till May 2013. Prior to becoming CAG, he'd been secretary in the department of financial services (DFS), under the ministry of finance.

The appointment is bound to evoke adverse reaction from the opposition. However, constitutional experts said there was no bar for CAG to take official position after a retirement.

CAGs AFTER RETIREMENT

• TN Chaturvedi (CAG 1984-1990): Joined BJP and was Rajya Sabha MP from 1992-98 and 1998-02; quit to become Governor of Karnataka and later Kerala; was CAG when the auditor looked into the purchase of the Bofors guns and found irregularities in procurement; controversy had contributed to the defeat of the Rajiv Gandhi government in the 1989 Lok Sabha polls
• CG Somiah (CAG 1990-96): Chairman of Asian Organisation of Supreme Audit Institution; was on UN Board of Auditors from 1993 and headed it in 1995; published an autobiography, The Honest Always Stand Alone, in 2010
• VK Shunglu (CAG 1996-02): Was a member of UN Panel of External Auditors; Secretary General of Asian Organisation of Supreme Audit Institution; associated with several international audit institutions; probed the alleged irregularities in 2010 Commonwealth Games
• VN Kaul (CAG 2002-08): Served on the Eminent Persons Advisory Group of the Competition Commission; member of the oversight committee for monetisation of immovable assets of Air India; invited by Lok Sabha Speaker to join the core group on knowledge research initiative of Parliament
• Vinod Rai (CAG 2008-13): Came out with a book ‘Not Just an Accountant: The Diary of the Nation’s Conscience Keeper’, where he wrote about several of the scams during the UPA2, including 2G spectrum, Commonwealth Games and coal auction. Rai was appointed first chairman of the Banks Board Bureau.

"Ex-CAGs can take up official appointments. Now whether they should take it up is for each individual to decide," said constitutional expert Subhash Kashyap.

There are 22 PSBs, including State Bank of India (SBI), IDBI Bank and Bhartiya Mahila Bank.

The 'search committee' for BBB members comprised Reserve Bank of India governor Raghuram Rajan, DFS secretary Anjuly Chib Duggal and the secretary, personnel, in the government. The Board is aimed to be a step toward establishing a holding and investment company for banks, which will require legislative changes, the government had earlier said. BBB is to constantly engage with the board of directors of all PSBs, to 'formulate appropriate strategies' for their growth. And, to handle the strategy discussion on consolidation of PSBs, including merger.

The disappointing performance of PSBs in the December quarter put a spotlight on the effectiveness of the Modi government's 'Indradhanush' strategy since August last year, to revamp functioning of the state-run lenders. BBB was one of the seven elements in this. The strategy is also to comprise professional appointments, re-capitalisation, de-stressing of assets, empowerment, a framework of accountability and governance reforms.

RETIREMENT PERKS

• TN Chaturvedi: Retired from IAS; was CAG from 1984-90; BJP Rajya Sabha MP from 1992-98, 1998-04 but quit in 2002 when made Governor of Karnataka and later Kerala
• Ranganath Misra: Chief Justice of India 1990-91, Congress Rajya Sabha member 1998-04
• MS Gill: Retired from IAS; Chief Election Commissioner 1996-2001; elected to Rajya Sabha on Congress ticket in 2004, Minister of Youth Affairs and Sports in UPA-1 and -2 governments
• P Sathasivam: Chief Justice of India 2013-14, made Kerala Governor in 2014; first former CJI to be appointed a governor

NOTE: The Chief Justice of India is number six on India’s order of precedence, while the Chief Election Commissioner and CAG are at number 9; the list compiles only those who held judicial/quasi-judicial positions and later accepted political appointments. There are several other bureaucrats who either joined politics or came to hold gubernatorial posts

The December quarter saw some PSBs reporting huge losses, such as Central Bank of India, Allahabad Bank, Dena Bank and Oriental Bank of Commerce. Punjab National Bank posted a 93 per cent decline in profit and NPAs rising to 8.5 per cent of all loans. SBI, the country's larger lender, saw a 62 per cent decline in net profit and fresh slippage of Rs 20,700 crore.

Under Indradhanush, while the government's promise of recapitalising PSBs over a three-year period seems on track, it seems inadequate for the scale of the stress. Of the Rs 25,000 crore meant for 2015-16, the government has given Rs 20,000 crore to 13 PSBs so far. PSBs will get Rs 25,000 crore in the next financial year, followed by Rs 10,000 crore each in FY18 and FY19.