9:49 PM
PSU banks need to free themselves from Govt influence, says Rajan
PITCHING for greater operational flexibility to public sector banks, the Reserve Bank Governor. Raghuram Rajan on Tuesday said they could become more competitive by distancing themselves from Government influence. "If public sector banks become competitive, and especially it' they do so by distancing themselves from the influence of the Government without sacrificing their 'publics character, they will be able to raise money much more easily from the markets.
"Indeed, the better performers will be able to raise more, unlike the current situation where the not so good performers have a greater call on the public purse. Competition will improve efficiency." he said. The remarks came in his annual day lecture of (he Competition Commission of India (CCI).
Rajan said there were well-managed public sector banks across the world and even in India today.
"So. privatisation is not necessary to improve the competitiveness the public sector. But a change in governance, management, and operational ami compensation flexibility are almost surely needed in India to improve the functioning of most PSBs. as the P J Nayak Committee has just reiterated." he added. The Governor said a number of eminently practicable suggestions had been made to reform PSBs. such as creating a holding company to hold Government PSB shares, increasing the length of PSB CEO tenures, breaking up the posilion of Chairman and CEO and bringing more independent professionals on bank boards, among others.
"We need to examine all these ideas carefully, many of which will help give public sector banks the flexibility to compete in the new environment," Rajan said. He noted that in the past, PSBs had the best talent. But today, past hiring freezes had decimated their middle management ranks, and private banks had also poached talented personnel from PSBs. "PSBs need to be able to recruit laterally, while retaining the talent they have, but to do so they need to be able lo promise employees responsibility as well as freedom of action." Referring to financial inclusion, he said RBI would come out with new relaxations on business correspondents shortly.
"Indeed, the better performers will be able to raise more, unlike the current situation where the not so good performers have a greater call on the public purse. Competition will improve efficiency." he said. The remarks came in his annual day lecture of (he Competition Commission of India (CCI).
Rajan said there were well-managed public sector banks across the world and even in India today.
"So. privatisation is not necessary to improve the competitiveness the public sector. But a change in governance, management, and operational ami compensation flexibility are almost surely needed in India to improve the functioning of most PSBs. as the P J Nayak Committee has just reiterated." he added. The Governor said a number of eminently practicable suggestions had been made to reform PSBs. such as creating a holding company to hold Government PSB shares, increasing the length of PSB CEO tenures, breaking up the posilion of Chairman and CEO and bringing more independent professionals on bank boards, among others.
"We need to examine all these ideas carefully, many of which will help give public sector banks the flexibility to compete in the new environment," Rajan said. He noted that in the past, PSBs had the best talent. But today, past hiring freezes had decimated their middle management ranks, and private banks had also poached talented personnel from PSBs. "PSBs need to be able to recruit laterally, while retaining the talent they have, but to do so they need to be able lo promise employees responsibility as well as freedom of action." Referring to financial inclusion, he said RBI would come out with new relaxations on business correspondents shortly.
Posted in: News 2014
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