This will mean the finance ministry will have a greater say in the promotion policy of these banks. The common promotion policy for all officers will begin from the grade of assistant general managers. Officers from this grade will be made to switch between banks to acclimatise themselves to new work cultures and infuse fresh ideas to spur competition among themselves. Currently, the ministry decides on appointments only at the level of executive directors, three levels above AGMs.
In the run-up to the exercise, the finance ministry recently advised all public sector banks to halt their promotion exercise for officers eligible to become assistant general managers. The promotions will resume once the ministry comes up with a policy on promotions and inter-bank transfers.
Simultaneously, it is encouraging government nominees on bank boards to play a more active role beyond attending meetings, like overseeing the activities at local head offices. The idea behind the move is to push the age profile of bank chiefs to a younger band and counter rising allegations of senior-level corruption at state-run banks.
The step is highly unusual. For the first time in decades, the government, as the owner of these banks, has stepped in to interfere with what is purely an administrative function.
Under the existing staffing pattern, officers who become executive directors which is one rung below chairman join a common pool with their colleagues from other banks, after having technically resigned from their banks. The government dips into this pool to select the chiefs of various banks.
The only exception to this system is the State Bank of India, whose chairman is picked from within the bank.
An officer involved with the process said the government now wants to go further. Since officers who join the ED pool often have very few years of service left and have also acquired habits and reputations, the officer explained, the government wants to do a weeding-out exercise at an earlier stage in their career.
But AS Bhattacharya, CMD of Bank of Maharashtra, said he was not sure if the inter-bank transfer of officials from AGM level and above will work. Because if a bank official comes to another bank on promotion, it will stall the promotion of officials of that particular bank. It will further discourage officials from work.
The move to shift the base for selecting bank chiefs to a lower age group was initiated by Vinod Rai, former secretary in the department of financial services. However, he had tried to limit the exercise to those who are general managers and above. Current secretary DK Mittal has made it more ambitious.
To ensure the process is completed soon, the finance ministry has decided to go in for closer interaction with the boards of public sector banks. Most banks have been asked to schedule their board meetings in New Delhi for the remainder of this year to facilitate the process.
AK Khandelwal, former CMD, Bank of Baroda and head of the human resource panel set up by the finance ministry, said: The committee headed by me had suggested creation of a pool comprising general managers who can undergo rigorous grooming and selection through assessment centres, for being picked up for ED to CMD posts. Assessment centre approach is a testing methodology where you can groom a person for those top posts.