Bankers ask govt to implement Nayak panel proposals
Calling for an end to ‘lazy banking’, Prime Minister Narendra Modi on Saturday said he is against any political interference in functioning of banks, but supports necessary ‘intervention’ in public interest. Calling upon the banking sector to establish banks that rank among the top banks of the world, Modi said banks need to be run professionally, assuring them that there would be no interference.
Speaking on the last day of the bankers’ retreat, ‘Gyan Sangam’, Modi said banks need to take a proactive role in helping the common man.
At their end, lenders, in a seven-point agenda submitted by State Bank of India chairman Arundhati Bhattacharya to Prime Minister Narendra Modi, suggested that the government should implement some measures from Reserve Bank of India’s PJ Nayak Committee to change the structure of public sector banks (PSBs) from state-owned to state-linked.
One of the suggestions is to establish a bank board bureau comprising professionals and eminent bankers to appoint and empower individual bank boards. Lenders have also suggested that the government set up a bank investment committee to transfer government holdings in banks. At present, government holding in PSBs is in the range of 56-84% with the highest being in Central Bank of India and the lowest in Bank of Baroda.
Another suggestion was to eliminate market distortions like debt waivers and interest rate caps for agriculture loans below R3 lakh. Both Bhattacharya and RBI governor Raghuram Rajan had earlier expressed concerns about debt waivers after the Andhra Pradesh government had announced waivers last month. Bhattacharya had said it distorts the credit discipline of borrowers and it takes time to restore it.
The presentation said the government should create an environment to protect right decisions and minimise interference of bodies like the Central Vigilance Commission, Comptroller and Auditor General, Central Bureau of Investigation.
Speaking to reporters, DFS secretary Hasmukh Adhia said, “There are processes in place to ensure that there is no corruption among bankers. That is not an issue. In fact, bankers are saying there are too many constraints from all these agencies and so accountability is already there.”
On the issue of human resource in banks, it has been suggested to the government to fully empower banks on HR decisions like recruitment and compensation. Bankers have also requested that the government should look into strengthening and ensuring implementation of legal framework like debt recovery tribunals (DRTs), securitisation and reconstruction of financial assets and enforcement of security interest (Sarfasei and willful defaulters.
Lenders have said they would re-orient portfolios for small PSU banks to differentiate, focus on specific niches to build capabilities and to optimise capital. They would also digitise top 30 processes and to deepen mobile banking penetration and deepen their mobile banking penetration.
Banks to govt
* Establish bank board bureau with professionals, bankers to appoint, empower bank boards
* Set up bank investment panel; reduce govt holding below 51%
* Protect right decisions, minimise interference,
* Ensure implementation of legal framework — DRT/ SARFASEI/ willful defaulters
* Eliminate market distortions: debt waivers, interest rate caps
Banks to implement
* Re-orient portfolios for small PSU banks to differentiate, focus on specific niches to build capabilities and to optimise capital
* Digitise top 30 processes, deepen mobile banking penetration
* Move towards risk-based pricing of assets
* Create/strengthen credit bureau (rural, SME, corporate)