ROAD MAP -
- Appointments
- BBB ( Bank Board Bureau )
- Capitalisation
- De-stressing
- Empowerment
- Framework of Accountability
- Governance Reforms
APPOINTMENTS
- The post of chairman and MD in public sector banks to be split into :
- MD and CEO
- Non-Executive Chairman
- This approach is based on global best practices
- As per the guideline in the companies Act it will ensure appropriate checks and balances in day to day functioning of these banks .
- The selection process for both these positions has been made more transparent and meritocratic
- Under the new process of selection for MD &CEO , even private sector candidates were also allowed to apply for position of MD & CEO .
BANK BOARD BUREAU
- BBB ( Bank Board Bureau ) will be a body of eminent professionals and officials, which will replace the Appointments Board for appointment of Whole-time Directors as well as non-Executive Chairman of PSBs.
- It is an autonomous body.
- They will also constantly engage with the Board of Directors of all the PSBs to formulate appropriate sttjtegies for their growth and development.
- Help banks develop differentiated strategies of capital raising plans to innovative financial methods and instruments
- The bureau will have three ex-officio members and three expert members (of which two would necessarily be from the banking sector), in addition to the Chairman.
- The Search Committee for members of the BBB comprise of the Governor, RBI and Secretary (FS) and Secretary (DoPT) as members
- VinodRai, a former comptroller and auditor general is chairman.
- Other members of the bank board bureau include
- Anil K. Khandelwal, former chairman :nd managing director of Bank of Baroda,
- N. Sinor, former joint managing director of ICICI Bank and
- RupaKudwa, former managing director of rating agency Crisil,
- The tenure of all the appointees will be two years.
- The bureau will also have members from the government.
Capitalization
- Although PSBs have been under stress, but they are still adequately capitalized and meeting all the Basel III and RBI norms.
- Now, the Government of India has shown its intent to adequately capitalize all the PS banks to have a safe buffer over and above the minimum norms of Basel III during the next few years.
- Out of total requirement the Government of India proposes to make available Rs 70,000 Cr. Out of budgetary allocation for four years as per the following table :
Allocation of Fund
| Financial Year 2015 -16 | Rs 25,000 Cr |
| Financial Year 2016 -17 | Rs 25,000 Cr |
| Financial Year 2017 -18 | Rs 10,000 Cr |
| Financial Year 2018 -19 | Rs 10,000 Cr |
| Total | Rs 70,000 Cr |
De-stressing PSBs
- The infrastructure sector and core sector have been the major recipient of PSBs' funding during the past decades.
- But due to several factors, projects are increasingly stalled/stressed thus leading to NPA burden on banks.
- In a recent review, problems causing stress in the power, steel and road sectors were examined
The major reasons affecting these projects
- Delay in obtaining permits / approvals from various governmental and regulatory agencies,
- land acquisition, delaying Commercial Operation Date (COD); lack of availability of fuel, both coal and gas; cancellation of coal blocks;
- Closure of Iron Ore mines affecting project viability; lack of transmission capacity;
- limited off-take of power by Discoms given their reducing purchasing capacity;
- Funding gap faced by limited capacity of promoters to raise additional equity
- Reluctance on part of banks to increase their exposure given the high leverage ratio; inability of banks to restructure projects even when found viable due to regulatory constraints.
Measures
- Project Monitoring Group (Cab. Sectt.) / Respective Ministries will pursue with concerned agencies to facilitate issue of pending approval/permits expeditiously
- Pending policy decisions to facilitate project implementation/operation would be taken up by respective Ministries/Departments.
- Ministry of Coal/PNG will evolve policies to address long-term availability of fuel for thee projects.
- Respective Discoms will be provided hand-holding towards enabling early reforms.
- Promoters will be asked to bring in additional equity in an attempt to address the worsening leverage ratio of these projects.
- Wherever the promoters are unable to meet this requirement, the Banks would consider viable options for substitution or taking over management control.
- The decision to increase import duty on steel has already been taken.
- RBI has been requested to consider the proposal of the Banks for granting further flexibility in restructuring of existing loans wherever the Banks find viability.
Empowerment
- The Government has issued a circular that there will be no interference from Government and Banks are encouraged to take their decision independently keeping the commercial interest of tht organisation in mind.
- The Government intends to provide greater flexibility in hiring manpower to Banks.
- The Government is committed to provide required professionals to the Board so that well-informed and well-discussed decisions are taken.
Framework of Accountability
- The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations.
- A clear distinction has been made between interference and intervention
- A robust grievance redressal mechanism is being put in place for customers of banks as well as staff.
Governance Reforms
- Performance link incentives will be announced .
- No political Interference in Bank .
Conclusion
- After Reading the above facts , we can forecast there are 2 Basic challenges infront of Banking Sector , these are as follows : -
| Financial Challenges | Non - Financial Challenges |
| A. NPA (Non Performing Assets ) B. Financial Inclusion C. Capitalisation | A. Political Interference B. High attrition rate C. Vacant position at higher level |
