RBI wants segregation of CMD post, panel to appoint directors

Written by ENS Economic Bureau | Mumbai | Updated: Sep 17 2014, 13:52pm hrs
RBIRBI Deputy Governor R Gandhi said the central bank has already recommended certain suggestions to the govt. Reuters
The Reserve Bank of India has proposed segregation of chairman and managing director (CMD) posts and a separate committee for appointment of directors on the board of PSU banks.

On corporate governance reforms in PSU banks, RBI Deputy Governor R Gandhi said the central bank has already recommended certain suggestions to the government. Based on various committees, including the PJ Nayak Committee recommendations, we have made certain suggestions to the government such as segregation of chairman and managing director posts and a separate committee for appointment of directors on board of PSU banks, and they are taking up the final decision, Gandhi said on the sidelines of the Ficci-IBA conference.

The RBI has been saying that CMDs of PSU banks enjoyed absolute power and often dominate the board during their tenure. In PSU banks, the top executive is designated as CMD, with the exception of the largest lender State Bank of India, where the top position is commanded by the chairman and there are four managing directors with clearly defined executive roles.

Appointments of chairmen for at least ten PSU banks is likely to get delayed or witness major changes over the next six months following the governments move to tighten the selection process of CMD positions in PSU banks. As many as 4 PSU banks are already functioning without a chairman and MD. The next batch of appointments is likely to be done only after the government finalises the new norms for appointment of bank chairman.

While Indian Overseas Bank chairman M Narendra retired last month, Bank of Baroda CMD SS Mundra has shifted to the RBI as Deputy Governor. United Bank of India has been without a chairman for some months now after the exit of Archana Bhargava as CMD.

No plan to hike debt limit

RBI Deputy Governor HR Khan has said there is no proposal to raise the debt limits for foreign investors as of now. Currently, the unrestricted category of government bond debt limit worth $25 billion is 98.98 per cent exhausted, triggering hopes that it would be relaxed soon. Khan added that the RBI may conduct more bond buybacks in future. The RBI repurchased just Rs 12,761 crore of government bonds out of the Rs 20,000 crore notified on Tuesday. Agencies