Monday, March 24, 2014

Will government consider outsiders as PSU bank heads?

ACCORDING to a recent recommendation by country’s apex bank the government should dissociate itself from the process of selection in picking the heads of state-run banks. Reserve Bank of India (RBI) has also suggested that top executives of public sector banks (PSBs) be selected from a wider pool that includes private sector candidates as well. Thus far heads of PSU banks are being selected...
from the state-run lenders only. The central bank has also recommended that such executives be paid salaries that are comparable with those in other industries.
According to a media report RBI has raised some issues on management in PSBs, which are being discussed referring to the proposal. One of the recommendations is that the selection process should be left to an independent panel of experts through open-market, global advertisements for the chairman's post.
The RBI said State Bank of India (SBI) and its associate banks will be benefited from the infusion of outside talent.
The recommendations were made by the RBI in a paper, Management and Governance issues in PSBs.
In 2012, RBI laid down guidelines for compensation of executives at private and foreign banks, which included capping the variable component at 70 percent of fixed pay in a year. RBI has also suggested a long tenure of five years and the government is examining a proposal for having a fixed tenure for CMDs of the PSBs.
The apex bank has also suggested that lateral movement in state-run banks should be restricted to the lower ranks and not take place at the top level. Such officials take longer time familiarizing themselves to a new work environment.

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