The government on Thursday said the selection process for the chiefs of public sector banks (PSBs), barring the top five state-owned lenders, will start in September. It, however, said for the top posts at these PSBs, only senior executives from nationalised banks, IDBI Bank and associate banks of State Bank of India (SBI) need to apply.
Last week, the government appointed a set of people to the top posts of the five largest PSBs, including four professionals from the private sector.
Under the appointments committee of cabinet (ACC)-approved guidelines for selecting managing directors and chief executive officers in PSBs (barring five large PSBs), “executive directors (ED) of nationalised banks, deputy managing directors (DMD) of IDBI Bank and managing directors (MD) of associate banks of SBI who have risen from the Associate Bank Services, with one year of service as ED/DMD/MD, and who have two years remaining service are eligible to consideration as MD & CEO.”
As part of a plan to revamp PSBs, the government had already separated the post of chairman and MD, based on global best practices and the Companies Act to ensure appropriate checks and balances. The operational head of a PSB is being designated as MD & CEO, while another person is being appointed as non-executive chairman.
The government last week appointed MD-cum-CEOs for the five largest PSBs — Bank of Baroda (BoB), Bank of India (BoI), Canara Bank, IDBI Bank and Punjab National Bank, including two professionals from the private sector for BoB and Canara Bank. It also appointed non-executive chairmen of five banks (BoB, BoI, Canara Bank, Vijaya Bank and Indian Bank), of which two (again for BoB and Canara) were from the private sector.
The selection of MD & CEOs of PSBs will be made by the Appointments Board under the existing methodology of interaction of the candidates with three panels of the sub-committee of the Appointments Board, a finance ministry statement said. The candidates will be rated out of 100 marks with 50 marks to be awarded for annual performance appraisal reports of five years and 50 marks assigned on the basis of performance during interaction with the Sub-committee, it added.
The new guidelines also laid down the eligibility criteria for the post of executive directors of the nationalised banks.
General managers of nationalised banks and chief general managers of associate banks of SBI, who have risen from the Associate Banks Service, and who have completed two years of service, are eligible for consideration for the post of executive director, it said.
The government reckons that giving higher salary (and employee stock options) in appropriate cases would help attract the best talent from the industry to run state-owned banks. The government has also assured that the selection process for both these positions will be transparent and meritocratic. The focus of these reform s is to improve the quality of deliberations in bank boards, leading to better asset quality and further resulting in better market valuations, it had said.