Letter to BS: Consolidation of PSBs can prevent PNB-like scams

This is with reference to “The buck stops here” (March 29). I agree with Mr Jaimani Bhagwati that with the passage of time the vigorous investigations into the alleged bank scams will get tangled in the legal quagmire. Public memory is short. Tax payers will foot the bill of the fraud losses and move on. It will take an enormously long time for the Punjab National Bank to even recover part of its losses. I also agree with the writer’s contention that were a big private bank to go under, the public and investor pressure would force the government to provide funding support to it. Hence, privatisation is not the solution to all the problems faced by public sector banks (PSBs). The Reserve Bank of India (RBI) should be a little more transparent about defaulting borrowers and the financial health of banks, in the interests of the depositors. As long as the government chooses to hold majority stakes in the PSBs, the manner of appointment of board members and their continuance needs to change.

The Banking Boards Bureau (BBB) must draw up a list of professionals of known competence who can represent the owner on the boards of PSBs as directors. Their performance needs to be closely monitored and those who do not do their job should be eased out. The statute should be amended so as to make it obligatory for the government to get the go-ahead from the RBI for the persons being appointed at higher ranks in the PSBs. They should be selected by the BBB. The RBI nominees should immediately be withdrawn from the PSBs thereby ending the conflict of interests for the central bank. The government should be alert to any disturbing signals emanating from these quarterly reports and take timely action. The government nominees, who represent the owner of the PSBs, should be accountable for their actions.

Arun Pasricha New Delhi 

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