Ministry of Finance (MoF) is planning to effect drastic changes in the way the public sector banks plan their performance from next financial year. The existing system of statement of intent (SoI) by which the PSBs prepare their plan of action ? projection of their targets on various business parameters for the particular year ? after discussions with the MoF will be replaced by a new mechanism called result framework document (RFD).
Under the RFD, the PSBs will have to provide an overall vision on their own without discussing with the MoF. However, after the MoF approves, it will be uploaded on the banks? website by April 15 every year. Similarly, RFD requires the final results of the banks to be uploaded by May 1. In SOI, the banks in their projections are only confining themselves to a particular year.
AS Bhattacharya, director (data analysis), MoF, was in Mumbai for a day recently to interact with the senior Mumbai-based bank officials on the course of action to be followed by banks after RFD is launched.
A national level seminar is likely to be held on the topic in New Delhi towards the end of the month, a source, who is familiar with the development, told FE on condition of anonymity. All the banks are supposed to appoint a nodal officer for RFD shortly, added the source
A banker, who attended the meeting, told FE on condition of anonymity that SoI is entered into as a confidential contract by the CMD and executive directors of a bank with the government. ?If the banks are asked to make it public, then it will be a difficult thing for them to do so. A CMD can only give an indication on what will be the profitability of his bank by the end of a year, but he can’t disclose the profitability before it is announced at the stock exchanges,? added the banker.
The heads of government-owned lenders may meet cabinet secretary or financial services secretary next month to discuss these issues. The government plans to go for a test-run for RFD next year. However, the head of a government-owned bank, said, ?There is a need to revisit SoI and provide more flexibility in certain business parameters.?