As the finance ministry prepares to pump Rs 10,000 to Rs 20,000 crore to strengthen the country's
public sector banks (PSBs) it also wants them to revamp their working style and achieve higher levels of efficiency in return.
Secretary financial services DK Mittal told Mail Today that most of the executive level officers in public sector banks are currently posted in the regional headquarters or the main central headquarters.
He said there is an urgent need to revise this policy so that these officers are sent out to work at the branches of the public sector banks where they have to directly deal with customers and ensure that more deposits come in and disbursement of loans is carried out more efficiently.
This would change the staffing profile of the public sector banks and help them to compete better with private banks, such as HDFC and ICICI Bank where senior executives man the branches and interact personally with customers.
Mittal said that while the finance ministry would be transfusing more money into public sector banks it would also be monitoring the performance of these banks more closely.
Various parameters, such as the rate of increase in the current and savings accounts (CASA) of banks, would be looked into for judging the efficiency of the banks. CASA accounts are cheap ways of raising funds for banks since the interest that has to be paid on them is low. Therefore, higher the proportion of these accounts in the total money with the bank the more efficient it is considered to be.
Mittal said the productivity per employee of a bank would also be taken into consideration in gauging its performance.
He disclosed that the finance ministry would also keep a closer watch on the Reserve Bank of India's (RBI) rating of public sector banks in evaluating the government-led lenders.
The RBI has a rating based on six parameters covered by the acronym CAMELS - capital, assets quality, management, earnings, liquidity and systems and controls. This is normally carried out every year.
The CAMELS rating of a bank is highly confidential and is not disclosed either by the bank or the regulator.
According to sources, the RBI had in fact lowered the CAMELS rating of State Bank of India (
SBI) for not setting aside sufficient capital for its bad loans, which had led to the public sector bank inflating its profits.
The SBI's image had taken a battering when its profit suddenly plummeted during the last quarter of the financial year ended March 31, 2011 as more funds had to be kept aside for NPAs, which the outgoing chairman OP Bhatt had refused to do. The new chairman Pratip Chaudhri has to now face the music.
According to sources, if the finance ministry had kept a close tab on the RBI ratings of the SBI this embarrassment could have been averted.
Mittal said the finance ministry expected to inject Rs 10,000 to Rs 20,000 crore during the current financial year in all public sector banks including State Bank of India (SBI), Bank of India (BoI), Syndicate Bank and Bank of Baroda ( BoB) to enable them to raise their Tier-I capital to eight per cent in accordance with the new banking norms. The exact amount that each bank would get from the government would depend on their net profit a apart from equity.
While the SBI management had been keen to go in for a Rs 20,000- crore rights issue to raise fresh funds, the finance ministry has shot down the proposal due to a lack of funds and is looking at its books more closely.
Courtesy: Mail Today 
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