Will not increase the number of GM-level posts in PSBs: Modi Govt

After a recent review, the department of financial services (DFS) sent a letter to 19 PSBs that the ceiling on the number of number of GMs will not be raised

For the first time in many years, the government has decided against increasing the number of general manager-level positions in public sector banks (PSBs).

After a recent review, the department of financial services (DFS) sent a letter (dated May 16) to 19 PSBs that the ceiling on the number of number of GMs will not be raised. "The matter has been considered and decision taken," it stated.

In 2016, the government had decided to increase the maximum number of GMs at PSBs to 465, from a ceiling of 442 and 420 fixed in 2013 and 2011, respectively. The finance ministry had derived a formula based on the business mix of banks to fix a cap, to be reviewed based on the performance of PSBs as on end-March 2017. 

Under the present guidelines, banks with annual business up to Rs 1.6 trillion may hire up to 12 GMs. PSBs with turnover in the range of Rs 1.6-4 trn could hire one additional GM for every Rs 200 billion of business. For turnover beyond Rs 4 trillion, one additional GM for every Rs 280 billion of business. The highest number can be hired by Bank of Baroda (46), followed by Punjab National Bank  and Bank of India (41, Canara Bank (39) and Union Bank of India (30).

The guidelines are applicable to 19 PSBs, termed ‘nationalised banks’ under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. State Bank of India and IDBI Bank,  governed by separate laws, are not covered under these. The guidelines, based on the business level of banks, was framed in 2011. At the time, the government felt there was a mismatch in the number of posts at senior positions in PSBs, “creating difficulties in proper manpower management”.

“This is a cost reduction measure in some form. And, a strong message to PSBs to perform. The downside, however, is that it might impact morale in the working of PSBs, with decision making already difficult due to lot of ongoing investigations," felt Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services LLP.

Since 2015, the Reserve Bank of India has put 11 PSBs under its Prompt Corrective Action framework. Such entities face severe restrictions for breaching various levels, including curbs on dividend distribution, branch expansion and management compensation. In the worst scenario, RBI may ask a weak bank to merge with others or wind up.