Letters: Challenges for the CEO

The challenges before Bank of Baroda's (BoB) new chief executive officer (CEO) P S Jayakumar have been well documented in the report, "Bank of Baroda awaits new CEO"(October 5).

The report is a quiet reminder to the government - a major stakeholder -that whenever it decides to induct an outsider into a public sector bank (PSB), he or she will face certain challenges. This is because all PSBs have more or less the same problems. Strong unions and non-motivated mid- and senior-level staff have been major impediments to their progress. The union executive's warning about the lack of incentives and the absence of a hire-and-fire policy in PSBs are, in a way, a challenge to the new CEO. Sometime back, a government spokesperson (read the Department of Financial Services), responding to the news about the appointment of the Bank of Baroda's CEO, mentioned that inducting outsiders at the top level was only an experiment and would not be applied on a large scale. That meant the government might appoint executive directors of other PSBs to the vacant posts of CEOs in some PSBs.

An interesting aspect is that Jayakumar is quite aware of the limitations of heading a public sector organisation and the difficulties of facing a highly unionised staff. Being the first-ever outsider CEO of a PSB, he has the disadvantage of experimenting with his creative strategies to deal with the situation. Further, union functionaries would all be on alert regarding his moves and be suspicious of his decisions.

The sad aspect of the staff situation in PSBs is that even those in the officer category are highly unionised, so the top management cannot depend on them for solving issues at the branch-level.

As for business initiatives, the staff of a PSB branch does not facilitate the growth of current and savings accounts (CASA). CASA growth happens on default, not as a planned strategy. In fact, there have been many instances where branch functionaries encourage customers to keep their deposits for a fixed tenure and not in the form of CASA. This is due to the fear of flight of deposits from CASA to other banks. The business strategy carved out at the board- or top management-level has to be converted into an aggressive policy for implementation.

As for the government, having taken a non-traditional decision, its stakes are very high.

K V Rao Bengaluru

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