PSBs and Indra Dhanush

High sounding jargons and words are no doubt  soothing to the ears and can be a boost to capital market sentiments  but the PSBs performance  based on the Indra Dhanush ie  seven prongs – appointments, bank board bureau, capitalisation, de-stressing PSBs, empowerment, framework of accountability and governance reforms is not guaranteed as long as the  Human Resources issue which is a major risk right from top to bottom  faced by the banks now is not adequately and quickly  addressed. 

Appointment.

This is a major risk the PSBs face as the Boards of PSBs as of today are neither professional nor committed  nor accountable and knowledgeable. The selection of Directors to the Board leaves much to be desired. Directors require thorough knowledge of banking business along with the skills to develop business with an understanding of the Economy, the risks that can emanate from the Government Policies, Regulatory Prescriptions, the linkages with the  international economy and the changes that can have a bearing on the operations of banks , technological advancements and the need to ensure close compatibility of the human resources skill and the technology on an ongoing basis etc etc. Any Tom Dick and Harry cannot find a place on Banks boards. Who will ensure this in our scheme of things where the Government, the bureaucrats and politicians have a say always and everywhere directly or indirectly in the functioning of banks. Appointment of Auditors is equally  crucial as they decide how the balance sheets of banks should appear and decide as to how to project the assets and liabilities camouflaging many items in consultation with the Board or the key person identified by the Board.

The top management, middle management and Human resources at all levels need lot of exposure, knowledge, experts in specialised areas like Forex, derivatives treasury management, Credit portfolio, Asset Liability Management and Risk management etc. The tendency to save costs on training to HR is a major casualty in Banking  and even the regulator seems to have ignored this aspect with the Closure of  the Bankers Training College. This has badly affected the transmission of Monetary Policy and the over all working of banks. It is a surprise to observe that many employees even do not know the existence of the RBI leave alone the regulatory role of RBI, ist role as  monetary authority etc.  This has already impacted the working of banks to a great extent.   

Bank Board Bureau:

The Constitution of the Board and the mode of Selection of the Board Members and its distinct Role to enhance the improvements in PSBs functioning is not very clear and convincing.

Capitalisation:

The present approach to capitalise the banks using Budgetary resources is highly questionable. The banks should generate reasonable profits to enhance capital and minimise the capital requirements  by minimising the risks through risky and sticky advances and investments. Here  the professionalism natters a lot. Banks should know how to conduct its advances portfolio and should bring the envisaged discipline on the part of the borrowers and the banks themselves. Rating of borrowers and levying of penalty for misconduct in the utilisation of banks funds need to be seriously viewed and made a  punishable offence. Capital infusion if at all found essential it should be linked to the performance of Banks Boards, Top management and the contribution that the banks make towards credit expansion, financial Inclusion, agricultural expansion, industrial growth,  support to exports  etc. Norms need to be fixed before induction of tax payers money.RBI's rating and opinion should be sought before providing additional capital .

Distressing PSBs and empowerment.

The interference by the Government Banks Bureau and the regulators should be kept to the barest minimum. This is easier said than done. 

Frame work of accountability and Governance Reforms.

Need proper definition, implementation and periodical examination by an agency taking RBI into Confidence. Can this happen in our set up? 

Dr T V Gopalakrishnan