Letter to BS: Why no central bank's nominee should be on PSB boards

This is with reference to “No RBI Nominee should be on PSB Boards: Patel” (June 13). I entirely agree with views of the Reserve Bank of India (RBI) Governor Urjit Patel (pictured). As a former RBI nominee director on the board of a PSB, directors have very little role to play especially in the management committees. They either endorse the loan proposals or advise caution in sanctioning proposals that may or may not be heeded by the chief managing director or the director of the PSBs. Often undue pressure is exerted on them to sanction loan proposals devoid of merit. The results are all clear and for all to see. On the flip side, there is a serious conflict of interest as a nominee of the banking regulator/supervisor sanctions loans sitting on these boards and then another nominee comes as a supervisor to see whether the systems/procedures in sanctioning those loans are correct. This presents a clear conflict of interest. 

The government should work expeditiously with the RBI to withdraw the latter's nominees on the board of PSBs. Simultaneously, it should carry out reforms to professionalise its nominees on these boards and hold them accountable for their work. The owners of PSBs need to be more professional in running these organisations and its nominees on their boards should be accountable for their actions/inactions. How long will the government use the shoulders of the Central Bank to do what it should be doing?

 

Arun Pasricha  New Delhi

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