Fixing the Fault Lines
The government plans to shake up the traditional governance structures of public sector banks. But it is easier said than done.
- May 2, 2016,
- Updated May 4, 2016 9:58 AM IST
"In one bank the taxi fare reimbursement policy gets the same coverage in a board deliberations as the NPA recovery policy. Other non-strategic issues discussed include purchase of office premises at Bhopal... (and) details of a lecture by a bank's CMD at a college"
Clearly, there is a long list of dos and don'ts for PSBs and time is certainly running out. The competition is already at their doorstep. Two new niche banks - microfinance lender Bandhan and infra dedicated IDFC - have started operation as banks. Close to two dozen payments banks in the transaction space and small finance banks in micro lending (both retail and corporate) will be making their debut in the next one year. PSBs have already lost some 25 per cent market share in the past two decades. The next decade is much more challenging with digital banking and niche players making their debut in the market. Safe and sound PSBs, with limited support from the government, are critical on a longer term.
That is where Rai's BBB comes into play with a decisive role. This is possible, of course, without any political or corporate interference. "The reforms in the PSBs should be of processes, systems, structure and people. We also have to define the job role of CEOs and down below to fix the accountability," says Chakrabarty. A professional and competent CEO, chairman and the board will go a long way in improving board deliberations and providing strategic direction. And boards would no longer have to waste their precious time discussing the details of a lecture by a bank's CMD. Time for a concerted effort by the government and all the stakeholders to turn around the PSBs.
"In one bank the taxi fare reimbursement policy gets the same coverage in a board deliberations as the NPA recovery policy. Other non-strategic issues discussed include purchase of office premises at Bhopal... (and) details of a lecture by a bank's CMD at a college"
Clearly, there is a long list of dos and don'ts for PSBs and time is certainly running out. The competition is already at their doorstep. Two new niche banks - microfinance lender Bandhan and infra dedicated IDFC - have started operation as banks. Close to two dozen payments banks in the transaction space and small finance banks in micro lending (both retail and corporate) will be making their debut in the next one year. PSBs have already lost some 25 per cent market share in the past two decades. The next decade is much more challenging with digital banking and niche players making their debut in the market. Safe and sound PSBs, with limited support from the government, are critical on a longer term.
That is where Rai's BBB comes into play with a decisive role. This is possible, of course, without any political or corporate interference. "The reforms in the PSBs should be of processes, systems, structure and people. We also have to define the job role of CEOs and down below to fix the accountability," says Chakrabarty. A professional and competent CEO, chairman and the board will go a long way in improving board deliberations and providing strategic direction. And boards would no longer have to waste their precious time discussing the details of a lecture by a bank's CMD. Time for a concerted effort by the government and all the stakeholders to turn around the PSBs.