Money & Banking
Empower state-run banks' boards, cut government control: Rajan
Outgoing Reserve Bank of India (RBI) Governor Raghuram Rajan on Tuesday suggested empowering of boards of state-run banks while making the case for a major reduction in government and regulatory oversight, including by the RBI itself.
 
"Today, a variety of authorities -- parliament, the Department of Financial Services, the Bank Board Bureau, the board of the bank, the vigilance authorities, and of course various regulators and supervisors, including the RBI -- monitor the performance of the public sector banks," Rajan said in his address here at the FICCI-IBA Annual Global Banking Conference.
 
"With so many overlapping constituencies to satisfy, it is a wonder that bank management has time to devote to the management of the bank," he said.
 
Proposing withdrawal of RBI nominees from the boards of public sector banks, Rajan stressed the need to reduce the overlaps between the jurisdictions of the authorities, while specifying "clear triggers or situations" where one authority's oversight is invoked.
 
He said agencies like the Comptroller and Auditor General (CAG) and Central Vigilance Commission (CVC) should only get involved in extraordinary situations where there is evidence of malfeasance, and not when legitimate business judgment has gone wrong.
 
"It is important that bank boards be freed to determine their strategies. Too much coaching by central authorities will lead to a sameness in public sector banks," the Governor said.
 
"Over time, RBI should also empower boards more, for instance, offering broad guidelines on compensation to boards but not requiring every top compensation package be approved," he said.
 
"Though the most pressing task for public sector banks is to clean up their balance sheets, a process which is well underway, a parallel task is to improve their governance and management."
 
"Over time, as the bank boards are professionalised, executive appointment decisions should devolve from the Bank Board Bureau (BBB) to the boards themselves, while the BBB, as it transforms into the Bank Investment Company (BIC), which is the custodian for the government's stake in banks, should focus only on appointing directors to represent the government stake on the bank boards," he added.
 
Rajan, whose tenure ends in early September, also voiced concern over state-run banks shunning project loans, saying they should tap their large low-cost deposits from "casa" or current account saving accounts deposits to finance infrastructure projects.
 
He said that since the crisis in the infrastructure space, banks are shunning project loans and are aggressively targeting retail borrowers.
 
"There are inputs to making profitable project loans such as the availability of casa deposits that will be accrued to the banks that build out their IT to access and serve the broader saver cheaply and effectively," Rajan said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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RBI penalises four co-operative banks for norms violations
The Reserve Bank on India (RBI) on Tuesday said it has imposed penalties of up to Rs5 lakh on four co-operative banks for violation of norms.
 
The central bank said it has imposed a monetary penalty of Rs5 lakh on The Co-operative City Bank, Guwahati, for flouting know-your-customer (KYC) norms and non-adherence to requirements relating to identification and reporting of suspicious transactions.
 
A penalty of Rs2 lakh has been imposed on Indapur Urban Co-operative Bank, in Pune dsitrict of Maharashtra for violations of norms related to KYC and anti-money laundering and credit exposure norms on loans.
 
RBI has also imposed a penalty of Rs1 lakh on Shri Dadasaheb Gajmal Co-operative Bank in Pachora of Maharashtra's district of Jalgaon for violation of norms relating to creation of floating charge on its assets without prior permission.
 
In a separate statement, RBI said it has imposed a penalty of Rs1 lakh on the Model Co-operative Urban Bank, Hyderabad, Telangana for violation of directives and guidelines on loans and advances to directors and their relatives.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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India ranked world's top exporter of information, communication technology
India has been ranked the world's top exporter of information and communication technology in a UN agency report that recommended that the country leverage this lead to innovate in emerging areas where biology and materials sciences intersect with computing.
 
Overall, India leapt 14 places from the 85th rank last year to the 61st in the latest Global Innovation Index (GII) released in Geneva by the World Intellectual Property Organisation (WIPO) in partnership with the Confederation of Indian Industry (CII) on Monday.
 
India ranked 8th in the world for producing graduates in science and engineering and showed the most significant improvements in human capital and research moving up 40 places to 63.
 
WIPO, a specialised agency of the UN, worked also with Cornell University and INSEAD, the international business school, to prepare the ninth edition of the index.
 
In a nod to India's "jugaad" tradition of innovation, the report said that its culture of "frugality and sustainability" can help it capture global markets. 
 
"For this to happen, however, India's industries need to have the hunger to be at the top of the value chain, its customers have to be more demanding, its policies have to be more transparent, and its talent pool has to get more hands-on experience while simultaneously growing to leverage the global talent pool," the report said.
 
WIPO quoted CII Director General Chandrajit Banerjee as saying: "The commitment of India to innovation and improved innovation metrics is strong and growing, helping to improve the innovation environment. This trend will help gradually lift India closer to other top-ranked innovation economies."
 
Areas where India is lagging include the business environment, where it is ranked 117, and education at the 118th spot.
 
To leapfrog into the emerging areas that combine biology, computing and material sciences, the report recommended that the industry double its research and development (R&D) investment and the government provide R&D grants to industry.
 
"Investing in innovation is critical to raising long-term economic growth," WIPO Director-General Francis Gurry said while presenting the report. "In this current economic climate, uncovering new sources of growth and leveraging the opportunities raised by global innovation are priorities for all stakeholders."
 
Another recommendation was to developing the research capabilities of universities. "Industry and government should team up with universities to create meaningful graduate research programmes utilizing global collaboration models where appropriate," the report said.
 
In these emerging fields, the report said: "Applications include developing sustainable fuels for transportation, predicting and preventing disease, determining ways to improve wellness, and delivering better nutrition" - areas that meet immediate needs of India.
 
The report cited the US-India Strategic and Commercial Dialogue as initiatives that had the potential for bilateral funding of R&D.
 
Among innovators in India measured by the number of patents obtained in the last five years, Infosys led with 281; it was followed by TCS with 244, Ranbaxy 196, Wockhardt 160, and SunPharma 84.
 
During this period, about 2,000 patents received by GE had Indian inventors, the report said. IBM came next with Indians involved in nearly 1,900 patents.
 
Overall, Switzerland ranked first globally as the most innovative economy on the index. It was followed by Sweden, Britain, the United States, Finland and Singapore. China for the first time muscled its way into the ranks of the top 25, just landing the spot.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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