Random Reflections – 3                                                                             16.02.2017

Banks Board Bureau – Indra Dhanush and ESOP

Business Standard, Editorial of 15.02.2017 titled, ‘Chasing rainbows- Banks Board Bureau is conspicuous by its inaction’, Economic Times article on the same day, ‘ESOPs for star performers at State-run Banks in the Works’ and the Finance Ministry’s news that they will soon announce Indra Dhanush – 2, made me to think.

BBB, Indradhanush and ESOPs are part of the recommendations of P.J. Nayak Committee and endorsed by Gyan Sangam – 1 held at Pune on Jan 2&3, 2015.

The role of BBB are, “Appointment of Board of Directors, advise Govt on appointments, advise Govt on desired structure at Board Level, help Banks to develop a robust leadership succession plan, to build a data bank, to advise Govt on a code of conduct and ethics for Managerial persons in PSBs, to advise Govt on evolving suitable training and development programmes for management personnel and help banks in terms of developing business strategies and capital raising plan etc”. All these by part time shows the intention – Rubber stamp of Govt.

The constitution of the BBB to replace Appointments Committee has not improved the situation in anyway.  BBB is only an interim body and will be collapsed into a Banking Investment Company as per Gyan Sangam.  The Govt share will be transferred to the Company.  It is proposed to reduce the share holding of GOI in Public Sector Banks to 40% in stages. It has not acted where it has to but interferes in areas like wage revision which is not its mandate.

It’s almost an year.  The BBB has only recommended 9 names for Executive Directors.  Many Boards of Banks have vacancies.  Some Banks do not have Managing Directors.  There are more than 40 vacancies of Officer / Employee directors in Public Sector Banks including SBI and though BBB has no role, its told that the recommendations have been sent to the Chairman, Bank Boards Bureau.  

The Chairman, Shri Vinod Rai, retired from Civil Service in 2008 and was appointed as CAG for 5 years.  He did a good job.  IDFC website still has his name as Director.  He is also now incharge of BCCI and a member of a Committee on Public Sector appointed by Kerala Govt.  All the members are also part timers.  Ms. Rupa Kudwa, Member, BBB is also Director in Infosys and Omadayar Group.  Two directors are secretaries in DFS and Dept of Public affairs who do not have time.  One more is RBI Deputy Governor and the RBI is under cloud.  Mr. Anil Khandelwal’s report was rejected by all Trade Unions in the Banking Industry like that of Nayak Committee, and he is also a member of BBB.  Mr. H.M. Sinor was Joint MD of ICICI and he will advice Public Sector Banks as member of BBB.  What a strange coalition?

So there is no way BBB can do justice.  It’s constitution itself is ultra virus.  To avoid Parliament it was constituted.  So it has to be dismantled and further plans for BIC has to be stopped.  Banks require autonomy and not over interference.

The ESOP scheme is being pushed by Gyan Sangam and now by Mr. Vinod Rai.  He has not discussed anything with the Associations, who are stakeholders inspite of our request.  Now this part time, retired officers are being advised by reports of Multinational Consultants like Mckinsey and Boston Consultancy Group, who are guided by IMF & WB.  This is not going to strengthen the Public Sector Banks. 

The objectives announced in Indra Dhanush have not been achieved. They were capitalisation, De stressing PSBs, strengthening risk control measures and NPA disclosures, empowering of Banks, A frame work for accountability and Governance Reforms.  There is no progress in reducing NPA or improving Governance or other objectives.  The new Chairmen and MDs announced by Indradhanush including some from Private Sector have not been able to make any turnaround.

So what is needed for Banking Industry is not ESOP for the so called star performers or variable pay.  Appreciation by this methods have not helped any industry.  Appreciation can be in the form of certificates, promotions, awards etc.

What the Public Sector Banks need are

*  Functional Autonomy

* Appointment of Directors and Chairman nominated by institutions like IIM, IIT, and an   

   Independent RBI. 

*  No interference but policy directions for the country.

*  More staff to provide better services

*  Attractive salary taking into account the risk and responsibility

*  Focus on rural and semi urban network and credit

*Adequate power to recover loans.(Implementation of recommendations of Parliament Standing Committee on NPA)

Public Sector Banks have proven strength.  Please let them function. They have saved this country during demonetisation and during all crisis periods in addition to regular contribution to the economic growth.

Public Sector Banks are like Temples.  Let us respect them.

Franco

ngcfranco@gmail.com