PS Jayakumar and Rakesh Sharma were the first to switch from the private sector to public sector banks (PSB) as MD and CEO of Bank of Baroda and Canara Bank respectively, in August 2015. Unfortunately, they were also the last private sector entrants into the corner offices of PSBs. The very fact that it has taken the government 10 long years to revive the practice speaks volumes about the complexity of the exercise.
There have been sundry cases where private talent has been brought in at fairly senior levels in PSBs on contract, and some of them have done great work, but a majority have left within a few years, stifled by the mismatch in culture—the most important and perhaps most misunderstood metric in a large organisation. In that context, it is doubtful whether the latest government experiment will succeed.
Last week, the Appointments Committee of the Cabinet revised the guidelines for the selection of wholetime directors of PSBs, superseding all earlier norms. Under the new guidelines, private sector candidates can apply for one of the four MD positions at State Bank of India. The government is also opening up at least one executive director position at large PSBs for the private sector.
It’s a well-intended move as the logic of bringing in private sector talent to top jobs in PSBs is pretty simple: bring in sharper managerial talent, market discipline, and tech-savvy efficiency. Exposure to private sector practices—in risk management, digital operations, or customer engagement—can be valuable. Also, at a time when the government is planning more mergers to create fewer but more competitive banks, there will be a need to have more private sector professionals in leadership positions because of their specialised skills and ability to think out of the box.
But reality may be totally different—parachuting private sector executives into top PSB jobs rarely works as intended. The problem isn’t capability; it’s context. Private sector leaders are used to nimble structures, performance-linked rewards, and relatively clear accountability lines. PSBs, on the other hand, are deeply embedded in bureaucratic hierarchies, burdened by legacy systems, social obligations, and political oversight. Success here depends more on navigating the maze of institutional constraints.
When private sector executives enter this world, they can face resistance from entrenched cadres who would view them as outsiders. Decision-making would slow, innovation may stall, and morale would suffer. The very qualities that make these leaders effective in a corporate environment—speed, autonomy, risk-taking—can backfire in a system that prizes procedure over performance. In such a system, a private sector leader’s instincts—to move fast, take calculated risks, and reward performance—are not just ineffective; they can be counterproductive.
The result is predictable: initial enthusiasm, followed by friction and eventual fatigue. Private-sector appointees can often find themselves stymied by institutional resistance and limited freedom to choose teams.
The solution isn’t to import talent from private banks—that can wait till PSBs are reformed from within. True change requires realigning incentives, digitising operations, and creating a culture of meritocracy—not replacing one set of managers with another. Cross-pollination of talent can work at the margins, but it cannot substitute for systemic reform.
Until that happens, the revolving door between private and public banking leadership will continue to spin, with little lasting impact. What PSBs need is not corporate saviours—there is enough talent already available at senior levels—but institutional renewal. Until then, changing the nameplate on the door will change little on the ground.