Profitable Psu Banks Will Not Sign Mou With Rbi
The Union finance ministry has indicated that profitable nationalised banks will no longer be required to sign memoranda of understanding with the Reserve Bank of India. Instead, they will have to submit their corporate plans for the next year to the ministry after getting them cleared by their respective boards. The ministrys approval for the plans will not be required since bank boards already have representatives from the banking division of the finance ministry as well as the central bank.
This indication was given during a recent meeting between the finance minister, senior finance ministry officials and the chiefs of profit-making nationalised banks. A formal order in this regard will be issued shortly, banking circles said.
These boards have also been allowed to create new posts in senior positions without obtaining government approval, as also determine the compensation norms and time duration of officers on deputation abroad.
The boards are now free to determine the entertainment allowance for their officers. The present allowance was fixed in the early 1970s. A manager, for example, currently gets an entertainment allowance of Rs 1,000 per month. the freedom to take certain important decisions.
The government has also permitted profitable banks to conduct direct recruitment for senior positions between scale IV and scale VII (regional manager and general manager scales) for specialised jobs like the computers department.
Profitable nationalised banks have also been given the freedom to choose the manner in which scale I and II officers should undergo the required posting period in rural and semi-urban branches. Officers are currently required to undergo these postings for two years for promotion from scale I to scale II and three years for promotion from scale II to scale III.
The boards have also been allowed to fix a minimum criteria for promotions and recruitment to the officer cadre. At present, graduation is the minimum criteria but banks are not allowed to prescribe a minimum standard of academic attainment like percentage of marks or specialised qualifications.
The meeting also decided to stick to the criteria of profitability fixed by the Reserve Bank two years ago, namely achieving net profit for three consecutive years, maintaining capital adequacy levels of 8 per cent and keeping the level of non performing assets to below 15 per cent.
Only five banks the State Bank of India, Union Bank, Oriental Bank of Commerce, Bank of Baroda, and Canara Bank qualify under this criteria while some other banks, including the Punjab National Bank, are expected to qualify soon.
However, the ministry has shot down a request to allow closure of loss-making and unviable branches.
At the meeting, the ministry officials sought to maintain status quo on the subject, saying that branch closure was a politically sensitive issue.
They pointed out that the banking sector has an important role to play in remote areas like the north east, although branches in such areas may not be viable.
The government had allowed profit-making nationalised banks to choose the location of their new branches about two years back.