Introduction
The Appointments Committee of the Cabinet (ACC) of the Government of India recently announced revised/consolidated guidelines for the selection of Whole-Time Directors of the Public Sector Banks (PSBs), reigniting the ‘public vs. private’ debate. Unlocking PSB Top Posts for Private Sector Bankers.
Features of the Revised Guidelines
- The revised Guidelines, inter alia, seeks to open one of the Managing Directors (MDs) posts at State Bank of India (SBI), and MD and one of the Executive Directors (EDs) positions at the remaining 11 PSBs, to be selected from other public sector financial institutions and professionals from private sector.
- The Guidelines aim “to have uniform sequencing of eligibility criteria and to align the same with the changing banking industry.”
- The Guidelines aim to recruit candidates for the PSB top positions through defined processes as and when the positions fall vacant.
- Earlier, the private sector bankers held positions of Chairman & MD (CMD) in two Nationalized Banks (NBs); however, they were ‘cherry-picked.’
- Eligibility criteria
- If the stated goal of the experiment (if so) is to bring in technically knowledgeable professionals, then the minimum qualification should have been fixed at a higher level instead of being just a graduate.
- The specified positions are open to the eligible candidates irrespective of the ‘size’ of the banks, as normally represented by their balance sheets, they have managed, as there are considerable differences between the size of SBI or NBs and NPvBs, let alone OPvBs.
- As for the one open position of SBI MD, para 2.4 (B) (II) mentions “Candidates eligible under public sector position.”
Challenges
- An eligible candidate from a small bank might find it difficult to manage a bank sufficiently bigger than that s/he had handled, whereas the opposite may not be true.
- It is not clear whether “public sector” means all types of public sector enterprises, including both the physical and financial sectors or even the government sector.
Way Forward
- Assimilation of new entrants: As for PSBs, it is widely acknowledged that they are more ‘special’ than PvBs owing to their massive social responsibility which includes tighter priority sector benchmarks, greater involvement in financial inclusion, etc.
- Acceptance of new entrants: Acceptance by employees would be another key factor for success, especially if the new CEO/ED from PvBs, brings about changes in the existing work force and culture.
- The private bankers should agree to compromise the salary to come to public sector given the contribution one can make in giving new direction to a behemoth.
Conclusion
It is a welcome, but baby, step to transfuse private banking culture into PSBs. However, its success would depend on its envisaged goal, which is yet fuzzy. And in this exercise, banking ‘regulations,’ instead of minor changes in the top management composition, would be paramount.
Source: BusinessLine
