To ensure greater stability and accountability, Banks Board Bureau (BBB) chief Vinod Rai today suggested that managing directors of the public sector banks should be appointed for minimum 6 years.
He also said that employees of the public sector banks will get higher perks from next fiscal so as to attract best talent from the market.
"Also the attempt is being made with idea to enthuse accountability in the system to find executive director or whole time director or a CEO at an age where he has got a minimum of 6 years or more to go in the institution so that he can be held accountable for the decisions," Rai said.
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"A large number of problems have risen because the tenure of the people were very short, maybe 15 or 18 months and left behind a while trail of decisions which are being questioned now. If we provide 6 years of tenure to the professional, he will do their business with great degree of accountability that they are going to be subject to," he said.
BBB was set up as an advisory body by the government last year to recommend on appointment of directors in public sector banks and advise on ways to raise funds and merger and acquisitions to the lenders among other things.
At an Assocham event here, Rai said, BBB is also thinking of the fact that the compensation package across the board of public sector banks needs to be improved.
"Maybe we are not able to do much with the fixed part of compensation package but variable part we are hopeful that in the next financial year we will be able to introduce a far more attractive package which do have bonuses, ESOPs and other performance linked incentives as part of the package," he said.
It may be monetary or non-monetary benefits to make it more attractive for professionals to enter into public sector banking space, he said.
Pointing to the P J Nayak Committee report, former CAG Rai said it had suggested that banks should be hived off into a holding company to ensure that they are free from government or political interference.
"The government hives off the stakes and put it into a holding company, bank investment company or whatever name and this holding company is made to be run by professional persons who have experience of running the bank...Once these professionals are appointed, the bank is allowed to run by itself," he said.
Noting that professionalism in banks has improved over a
period of time, Rai said government is taking effective and healthy steps in this direction.
Going forward, banks are indeed run by board which comprises of professionals in the true sense and the effort is to ensure that it is the board which run banks, he said.
"At the same time people who join the board has responsibility to perform also and that responsibility is to take the risk which is called decision making. It is common knowledge that a decision of public sector bank is likely to be questioned and certain agencies are going to look into," he said.
The attempt was to provide an intermediate mechanism which is called Oversight Committee to give certain amount of confidence to private and public sector banks for process of NPA resolution, he said.
On the stressed assets, Rai said, banks have huge amount of bad loans and it needs to be sorted out so that they start lending and help economy to grow.
"We are struggling with the fact that there are huge amount of stress in the balance sheet of the banks which needs to be sorted out... Banks must start lending. Unless they start lending, the process of regenerating the economy, reinvigorating the growth of infrastructure in the economy will not take off," he said.
Rai said though the Corporate Debt Restructuring Cell was created with very noble intentions in early 2000s but later it found itself sagging with humongous amount of stressed assets, in which there was no way it could manage those resources.
There have been innumerable cases where project reports were inflated, balance sheets manipulated and submitted, funds siphoned off and others, he said.
While on the other hand, there are an equal number of instances where irresponsible or lazy lending took place, due diligence was given go by and where supervision was callous.
"In the Banks Bureau, we are engaged in the task of trying to ensure that going forward, these things do not repeat themselves, a project report needs to be scrutinised very effectively, maybe we were lacking experience in the banks which scrutinised or appraised these project reports, these have to be done by one or may be two independent agencies not having anything in common with each other," he said.
Sharing his perspective on the most recent demonetisation move of the government, he said that there is no harm in trying to cleanse the system and there are various ways to do it and demonetisation was one very effective way.
"Any attempt to cleanse the economy is a very noble attempt and we should lend our energies in ensuring that process of cleansing takes place," he said.
"It is far too early for us to say it is a success or not a success," he added.
