Govt splits CMD's post in state-owned banks

Begins reforms drive in the segment; four lenders get MD & CEO, to have part-time chairman; no decision on fixed tenure yet

In a departure, the government has split the post of chairman and managing director at public sector banks (PSBs). In a statement on Wednesday, the finance ministry named managing directors (MDs) and chief executive officers (CEOs) of four banks and said the procedure for selection of a non-executive chairman would be announced shortly.

Under the new format, “the chairman (except for State Bank of India, or SBI) will be a part-time board member who will preside over board meetings and not be an executive chairman”, said a statement by the finance ministry.

While the move is in line with the Reserve Bank of India (RBI)’s suggestion, some of its other recommendations, such as fixed tenure of chief executives, haven’t been made effective. The new appointments are for three years or till the candidates retire, whichever is earlier.

Last year, the government had announced a fixed tenure for the SBI chairman. It was expected the procedure for other PSBs would be the same.

The four banks for which new MD & CEOs were announced on Wednesday were Oriental Bank of Commerce, Indian Overseas Bank, United Bank of India and Vijaya Bank (whose CMD, V Kannan, retired on Wednesday).

While R Koteeswaran, executive director (ED), Bank of India, has been appointed MD & CEO of Indian Overseas Bank, Animesh Chauhan, ED, Central Bank of India, will head Oriental Bank of Commerce. Kishore Kumar Sansi, currently ED at Punjab and Sind Bank, will be MD & CEO of Vijaya Bank. P Srinivas, ED at Bank of Baroda, will move to United Bank of India as MD & CEO.

RBI had suggested splitting the post because a bank CMD also presided over board meetings and, as such, was extremely powerful.

Wednesday’s move comes two days before the finance ministry is scheduled to hold a meeting with bankers in Pune on areas of reforms. Blueprints of the proposed reforms will be presented to the prime minister at the concluding session of the meeting.

Experts say the latest move could well be the start of long-pending reforms at PSBs.

Earlier, a committee headed by former Axis Bank chairman PJ Nayak had suggested radical changes, including the government giving up control in PSBs, for improving corporate governance practices.

After the National Democratic Alliance government came to power at the Centre in May, it cancelled all future appointments decided by the United Progressive Alliance government. As a result, there were eight top-level vacancies at PSBs. The top posts at four banks — Bank of Baroda, Canara Bank, Punjab National Bank and Syndicate Bank — are still vacant.

“The appointment at Syndicate Bank is still under the consideration of the government. It will be decided very soon,” the finance ministry statement said.

For the remaining three lenders, which are bigger in size (category-A, with total business of Rs 3 lakh crore), the government said it had decided to go for a fresh selection procedure to widen its search for candidates. “The procedure for this will be announced shortly,” the release added.