RBI Dy Guv SS Mundra raises PSB alert, says unlike driverless cars talk, no question of having ‘leaderless’ banks

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Mumbai | Updated: September 29, 2016 8:37:22 AM

Reserve Bank of India deputy governor SS Mundra on Wednesday expressed concern over the increasing number of senior officials retiring from public sector banks, saying it was an area that needed “serious attention”.

Reserve Bank of India deputy governor SS Mundra on Wednesday expressed concern over the increasing number of senior officials retiring from public sector banks, saying it was an area that needed “serious attention”.

Speaking at the State Bank of India Banking and Economics Conclave, Mundra said unlike the talk about driverless cars, there was no question of having leaderless banks, which is why the issue was imminent and needed to be solved.

“We are far away from talking about leaderless banks, I don’t think this will happen tomorrow,” Mundra said, adding that leaving SBI, among public sector banks, there was a vacant position among every 20 CEO and CMD positions.

“Eight of them are retiring in 2017, 10 of them are retiring in 2018 and there would be only one who would be retiring beyond the next two years,” he said. Mundra added that nearly 73% of the deputy general managers and general managers put together in public sector banks are above 55 years of age and another 23% are in the age group of 50-55.

“This is the whole profile of leadership in the succession line …so this is another area that needs serious attention,” he said.

Mundra’s comments come after reports about the lack of leadership at the Indian Overseas Bank, especially at a time when it tackles the highest ratio of soured loans among lenders in India. Indian Overseas Bank’s bad-loan ratio stood at 20.5% as of June 30, versus 9.4% a year earlier and an average of 11.3% at 27 government-led banks and 2.8% at private sector banks, Bloomberg reported last week.

Talking about amount of provisioning required against bad loans, Mundra said it would be a hazard to guess a number as it was a “dynamic situation”. “But some things are quite clear, as we look at the past few years trends on recovery and upgradation vis-a-vis incremental slippages, … there may be a requirement for additional provisions.”

The RBI deputy governor also spoke of the need for increased regulation with the growing significance of fintech in financial services. “There needs to be in place a suitable regulatory framework to address the associated risks, like technology risks, cyber security risk, data-theft risk..”

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