‘Need to review PSB governance, improve salaries’

Nayak Committee had also recommended several steps like bringing down the government stake.

By: ENS Economic Bureau | Mumbai | Published: August 7, 2014 1:24 am

Reserve Bank of India Governor Raghuram Rajan on Wednesday said the boards at public sector banks needed to be strengthened while the incentive structure for chief executives of these banks need to be improved to enhance corporate governance.

In an interview to ET Now, Rajan also said salaries of public sector bank executives needed to be revised to bring them on par with salaries of executives at privately-owned lenders. “We have to draw in people from the private sector who want to give back themselves, and in that way you will get talent into these public sector enterprises,” Rajan said.

Rajan’s comments come in the wake of Syndicate Bank chairman SK Jain’s arrest over bribery allegations. “We need to again look at the governance of the public sector banks and understand the deficiency there and try and improve it,” Rajan had said on Tuesday. Rajan had earlier said PSU banks can become more competitive by distancing themselves from government influence.

The Nayak Committee had also recommended several steps like bringing down the government stake, splitting the chairman and MD position, board-run banks and a holding company for PSU banks. Meanwhile, in a post-policy conference call with analysts, Rajan said the RBI is all for reducing “pre-emptions” over a longer horizon for more efficiency in the financial system.

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