Public Sector Banks Should Be Allowed To Function In Professional Manner

Health of national economy is directly proportional to a sound banking system. Banking system will be sound when all major banks of the country are free to take their decisions in the most professional manner. Nationalized Banks handles  75 % of the total banking business , so the people sitting on their top posts should be thorough professional and political / bureaucratic  interference nce should be bare minimum, however as for as checks and controls of regulator (read Central Bank) should be utmost stringent. 

Having said that, if we see the way political masters and bureaucrats select, appoint CMDs and other top officials tells a different story.

To start with, on October 27, the government cancelled proposed list for  appointment of 8 CMDs and 14 EDs for Public Sector Banks.  The decision is based on recommendations of a three member committee consisting of secretary expenditure, governor Reserve Bank of India and surprise of surprises secretary school education. There were no professional banker on the committee. It is unclear what contribution came from the two IAS officers, neither of them has any expertise in running a commercial Bank.

The RBI governor is well aware of the rot and hopefully opened up his mind in the committee instead of being politically correct.  In fact, he was trying to argue few months back that bankers are scared stiff of the sword of Vigilence enquiry hanging over their heads and hence unable to take decisions. He ignored the fact that no bank chairman has paid a price if bank is found to be short of collateral- a cardinal sin in banking that happens routinely in nationalized banks. 

Nationalized Bank's CMDs and EDs are chosen by a selection board, headed by the governor RBI and includes officials from the finance ministry, external experts and sometimes bankers. But the reality is that the appointments are decided by politicians in the power and the bureaucrats running finance ministry.