Letters: A new banking structure

Apropos the editorial "Lure of lucre" (August 29), it is important to ask a simple question. Why do only some bankers feel tempted to take bribes and not others? It is within our reach to fix this and with essentially the same overall structure. Unfortunately, we are being failed by ideology on both sides of the divide: the battle between the tired Left ideology and the challenged Washington consensus.

May I suggest some simple steps to address this problem:

• Corporatise the public sector banks: Bring them under the Companies Act and take them out of the State Bank of India Act and Bank Nationalisation Act. Give them the same structure as IDBI Bank. Essentially, get them out of Parliament.
   
• Let government be the single-largest owner but with a holding below 51 per cent, and no one else should own over five per cent.
   
• Let board appointments reflect some large owners in addition to the government with the banks' board nomination committee appointing directors other than the government director. Let the government propose the appointment of the chief executive officer (CEO) and directors, to be ratified by other directors.
   
• Allow human resource policies to reflect sane market reality.
   
• Keep priority sector prescriptions for funding: this allows government to get support for its priorities.
   
• Ease the entry of new banks to keep pressure on incumbents to innovate in a rapidly digitising world and not retry failed experiments such as small banks. Why not fix urban and rural co-operative banks first? Payments bank are a hard way to facilitate payments especially as the size of the prize for telecom companies will be modest and the benefits they will get will be an account of customers becoming more sticky because of this additional service, but for this they will pay the price of Reserve Bank of India oversight.
   
• Do not create a Bank Investment Company (BIC) or a Banks Board Bureau. It will be the banking division that will populate the BIC. It is better to trust the board of the reconstituted public sector bank - in fact, the Axis Bank model works. If you need a special purpose vehicle for investment, create it for central public sector enterprises and take these enterprises out of the ministries that control them.
   
• Ensure CEO appointments are for five years. Once appointed, there should be no retirement age but tenure of appointment.

Janmejaya Sinha Mumbai

Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number