Govt's move for smooth transition at helm of banks

It was not too long ago that top posts in public sector banks remained vacant for months due to governmental delay in identifying suitable candidates. Such state of affairs have, in the past two years, prompted the administration to expedite the selection process by issuing notifications much before bosses vacated office. This is in a bid to avoid lobbying and last-minute changes.

Now, the government has taken the matter another step forward. It has asked the new chief (executive director) to join a bank 10-15 days before the retirement of the existing chairperson. The new system will be applicable also to general managers, who will eventually be elevated to as executive directors.

Dena Bank, for example, is set to see the retirement of its chairman and managing director D L Rawal this month-end. His successor, Indian Overseas Bank’s executive director Nupur Mitra, will next week join the Mumbai-based bank. She will be taking charge as an Officer on Special Duty on Monday — seven days before Rawal’s superannuation.

The move is aimed at helping the new chief acclimatise with the bank’s working culture and interact with the top management, including the outgoing head, to get a feel all matters including issues. “Such a practice,” a source said, “will also ensure that a new boss does not reverse a policy decision soon after taking charge.” Bankers see this government decision as a fallout of the poor earnings announced by the new management of the State Bank of India for the January-March quarter. The country’s largest bank declared a 99 per cent decline in profit, which stood at Rs 21 crore for the last quarter.

That comes as the lowest in the bank’s history in more than a decade — and is attributed to higher provisioning.

The government had in April announced a new chairman for SBI, following the retirement of O P Bhatt in March. Three new managing directors were also appointed along with top boss Pratip Chaudhuri.

Bankers now expect a new chief will always be appraised of future provisioning requirements and outlook on asset quality.

While bankers have hailed the move to make transition smooth, some of them raised eyebrows, claiming that it may impact taking decisions. Says a senior executive from a mid-sized public sector bank: “There can be a delaying on certain decisions, especially regarding loan sanction. For, the outgoing boss may mostly be hesitant to sanction fresh loans.”

The decision-making powers during the overlap period will stay with the existing chairperson. The new chief will take assume the role of the chairperson after his predecessor retires.