Finance Ministry Reviews Progress made after Public Sector Banks' Reform Plan Indradhanush

The Indradhanush package was announced on 14th August, 2015 for transforming Public Sector Banks (PSBs) through a bottoms-up approach. It represents the most comprehensive reform effort undertaken since banking nationalisation in 1970. The framework mainly comprised of appointments, Banks Board Bureau (BBB), capitalization plan, destressing, empowerment, framework of accountability and governance reforms among others.

A high-level meeting was held today under the Chairmanship of the Minister of State for Finance Shri Jayant Sinha which was attended among others by the Secretary, Dept of Financial Services, Ms Anjuli Chib Duggal, senior officials from the Ministry of Finance and Chairmen and Managing Directors of various PSBs. Banks were requested to give the progress on different subjects post Indradhanush. The next 'Gyan Sangam', proposed to be held in January 2016, was also discussed.

Following subjects were specifically discussed:

a) Growth: The issue of poor asset quality was discussed. The banks clarified that the problem may continue for two to three quarters before their situation improves. Banks were advised to make judicious use of their capital.

b) Governance and Board: Various issues related to board and governance were discussed in detail. These included the board structure and issues relating to appointment of directors, functioning of board level committees and other measures to improve the decision making process of the board. Risk management practices were also discussed.

c) Compliance: The meeting also deliberated on the issue of having robust compliance policies and the need to have requisite checks in place to detect any violations, along with strong alarm and signalling systems. The issue of human intervention in compliance related issues was also discussed and it was deliberated as to how to make it completely system driven. The recent developments relating to Bank of Baroda were also discussed and banks were exhorted to have system in place to prevent such incidents.

d) Non-core assets: The issue of non-core assets and whether disposing them off is in commercial interest of the banks to improve capital adequacy was discussed. Discussions also covered existing foreign branches of PSBs. How can best value be realised from such investments and possible role of the Government was also taken up.

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