Level-playing Field for Government Banks?
PJ Nayak Committee has some excellent ideas
 
Bank unions are furious at the suggestion that the government should reduce its holding in nationalised banks to below 50%. The All India Bank Employees Union (AIBEA) has threatened a series of protests and announced a strike against the proposal. But some of the key recommendations of the committee on bank governance, headed by former Axis Bank chairman PJ Nayak, seem the only way forward to ensure the long-term revival of nationalised banks. A core recommendation is to unshackle banks from government control and finance ministry’s interference, by reducing government holding to under 50% and bringing banks under the sole regulation of RBI. 
 
It suggests that when government shareholding is brought below 50%, the rest should be transferred to a bank investment company (BIC). BIC will act like a passive fund whose focus would be to ensure good returns on its investment. The committee recommends the creation of a category of authorised bank investors (ABIs) who can invest in banks without prior approval. Interestingly, GV Ramakrishna first mooted a BIC-like concept for public sector undertakings (PSUs) when he headed the Disinvestment Commission. Unfortunately, it was not implemented. Instead, PSUs were sold as going concerns allowing private acquirers to reap mammoth benefits from their real estate assets. BIC is a sound concept, provided the institution is allowed to function independently, like it does in Singapore. Otherwise, it will turn into another SUTI (Specified Undertaking of the UTI, a holding company formed when the mammoth Unit Trust of India was split) which is not allowed to make any independent decisions. 
 
Other key recommendations flow from the need to create a level playing field between government and private banks. It recommends that these ‘privatised’ PSU banks be removed from dual regulation of the finance ministry and RBI and brought solely under RBI. They must also be subject to the same listing and disclosure norms. 
 
The revamp would also include truly independent directors being appointed on bank boards, rather than government appointees; strict adherence to the Securities and Exchange Board of India’s (SEBI’s) listing norms. The committee has also sought a rationalisation of bank classification; especially ‘old private banks’ and wholly-owned government banks such as the Bharatiya Mahila Bank.
Comments
Nagesh Kini
8 years ago
The Bank Unions, instead of resisting changes, should insist that the GOI divest in favour of small and retail investors and former and present bank employees and not large institutional entities.Dr. Nayak has in deed made many sensible do-able recommendations.
Simple Indian
8 years ago
While the Nayak Committee recommendations are welcome, and if implemented, would help make PSU Banks profitable and efficient, I am hardly surprised by the Unions' response. It reminds me of the way Bank Unions would 'terrorize' customers by going on a strike in the pre-ATM era in 1980s. It's high time the PSU Banks are made accountable and profitable. In this era, where jobs are scarce for the educated youth, PSU Banks retain huge workforce of pre-IT era, who can just about work on computers for basic tasks. One visit to any PSU Bank branch will show just how lethargic the older staff is, particularly when it comes to using IT facilities, which is in fact meant to improve their productivity. PSU Banks offer its staff the best of both worlds - a laid-back work culture as in a Govt office, but with job security, but enjoy salaries & perks comparable with private Bank staff, without the work pressures seen in private Banks. India must move away from the socialist policies and make best use of its institutions and human resources to have efficiency as paramount reason for their existence. But then, India is not exactly known for meritocracy, is it ?
Ashok Kumar Bhargava
8 years ago
New Government has come let us see whether Ache din aney wale hain? for banks also
Gopalakrishnan T V
8 years ago
The need to run the PSBs on professional lines is long overdue as the Government cannot any more afford to carry on the burden of running such rotten institutions with tax payers’ money and with other attendant implications on its finances and the economy. The way these banks are run allowing borrowers to loot perennially the depositors' and tax payers money with the solid backing of the Government cannot go on for ever and time has come to have a relook and revamp the banks to make them really the powerful engines of growth of the economy. The model suggested in the report on par with Temasek in Singapore or the UK Governments UK Financial Investments Ltd can be easily replicated and what the economy wants is that banks should play their role of mobilisation of deposits and the deployment of funds for equitable growth of the economy effectively under proper regulation and supervision by a professional body without any interference from the Government what so ever and accountable to the parliament. The Government and the economy should be the beneficiaries out of such banks and not the other way round. No doubt, the unions will have to be taken into confidence and their interest cannot be jettisoned. The need to have professional Boards,effective constructive regulation and supervision is paramount and hope the new Government would take this report seriously and implement the recommendations in letter and spirit. More than any one,the Government would be the major beneficiary is also the moot point.
amit kumar
Replied to Gopalakrishnan T V comment 8 years ago
for your information psu are not using tax payer money.but generate their own income.today most of psu bank and psu are profitable ,and earning income for goverment.brother you seems to be very unaware of real facts.
S.S.A.Zaidi
8 years ago
Nayak Committe recommendations are worth implementing.Unless the Govt fetters are removed these Public sector banks will not be able to come out of the morass they are in.I am sure Mr Rajan as RBI governor will continue and Mr Arun Jaitely our FM who is very articulate will ensure that Nayak committee recommendations are adopted
Zaidi
ramchandran vishwanathan
8 years ago
Hope Mr.Modi & Jaitely are listening
Its high time Nationalised banks give a run for their money to the private banks.They are much more capable.
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