RBI governor Raghuram Rajan is of the view that public sector banks’ (PSBs) employees are “overpaid” at the bottom and “underpaid” at the top. “We over pay at the bottom – our compensation packages are attractive enough to get really qualified persons in. We have to turn what seems like an “over-pay” into an opportunity to give talented persons a brighter future,” Rajan said while addressing a FICCI lecture on “New Horizons in Indian Banking”. “PSBs need to get fresh young talent, but also have to give extensive training,” he added. Rajan also called for a new structure to oversee PSU banks. According to Rajan there “too many regulators have overlapping jurisdictions”. Rajan is of the view that the government and RBI need to reduce the difference in treatment towards private lenders and PSBs.
Talking about the banking sector and the use of technology, Rajan said, “People trust public sector banks – therefore, PSBs’ focus should be to improve their services for people…we are trying to make banking requirements more friendly to technology.” On the topic of cyber security, Rajan said, “We need to bring about a cultural change when it comes to tackling cybersecurity. There are too many access points, too many people share passwords – we need to be alert on cybersecurity.” Rajan emphasised the need to bring in a “cultural change” on the cyber security front. “Lenders should take a fresh look at security architecture,” he said. He added that the RBI is working to upgrade capabilities of inspectors to undertake bank system audits. Work is also in progress to detect vulnerabilities in the system.
Expressing concern over the loan practices, Rajan said, “There is a need to tighten loan practices at state-run banks. I am concerned about state-owned banks shunning project loans. These are still profitable. There is need for more equity, flexible loan structuring in infrastructure projects.” “There are inputs to making profitable project loans such as the availability of casa deposits that will be accrued to the banks that build out their IT to access and serve the broader saver cheaply and effectively,” Rajan said. “There is also need to convince stakeholders that there is no different treatment being given to large and small customers,” he said, adding that, “Financial stability must be ensured while we encourage innovation and new ideas.” “India is still grossly under banked and opportunity of financial technology is rising strongly,” he said.