Indradhanush approach to revamp Public Sector Banks

Public sector banks play a vital role in development of our economy by providing finance to vital sectors of our economy like infrastructure and industries but these sectors faces various issues like delay in construction ,regulatory approvals,hurdles in land acquisition which turn the loans of these PSB’s in non performing assets which effect the profits of PSB’s and added up to NPA’s of banks.

To solve these problems faced by PSB’s, GOI has taken various steps to revitalize these PSB’s:-

1. Appointments

In appointments for post of MD and CEO’s of PSB’s private candidates are allowed to apply and in subsequent process two MD & CEO of major PSB’s was appointed from private sector and post of chairman has been separated from MD &CEO to bring transparency in the working of PSB’s.

2. Bank Board Bureau

The Bank Board Bureau(BBB) will replace the Appointment Board for the appointment of Directors and non executive chairman of PSB’s.The BBB will engange bank board of directors of various PSB,s and formulate policies for growth .

3. Capitalization

Government of India has provided adequate financial assistance to PSB’s bank to meet Basel III norms and also taken steps to built capital buffer over and above basel norms Government has decided to allocate 70,000 cr to banks in four years. In current financial year i.e 2015-16 -25,000 cr will be infused by government and in 2016-17- 25,000cr, 2017-18- 10,000cr,2018-19- 10,000cr.

4. De- stressing

To distress public sector banks as major recipient of loans from PSB’s are core infrastructure companies which faces regulatory issues in clearances of different project thus leading to NPA for banks. Thus government has set up Porject Monitoring Group within concerned ministries for speedy clearances of stalled or new project and flexible restructuring of long term project loans.

5. Empowement of PSB’s

GoI has told PSB’s that their will be no interference in their working so that they can take decision independently keeping the best interest of organization in mind and bringing accountability .Banks has been told to set up grievances redressal system for customers and staff.

6.Framework of Accountability

A new system has been developed to measure the performance of PSB’s now as Key performance Indicator (KPI).

KPI divided in four sections totaling 100 marks, 25 marks each allotted to efficient use of capital and business diversification.15 marks each allotted to NPA’s and financial inclusion plans and remaining 20 marks reserved for strategic initiatives .

The incentives and bonus to be paid to MD’s and CEO linked to KPI.

7.Goverance Reforms

Process of governance reforms started from Gyan sangam enclave in which various discussions was held on different issues face by PSB’s.

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