A day before the presentation of the Budget for 2016-17, Prime Minister Narendra Modi approved the constitution of the Bank Board Bureau, which seeks to reform the appointment process for top-level posts and improve governance in public sector banks.
Vinod Rai, former Comptroller and Auditor General of India, under whose watch the CAG estimated the loss due to spectrum allocation at Rs 1,70,000-crore under the UPA II government, has been appointed chairman of the Bureau, the Finance Ministry said in a statement on Sunday.
Modi also approved the appointment of Anil K Khandelwal, former CMD of Bank of Baroda, H N Sinor,
former Joint MD of ICICI Bank and Rupa Kudwa, former MD & CEO of rating agency Crisil, as members of the Bureau. Rai and the three members will have a two-year tenure from the date of notification, or until further orders, the ministry said.
The Bureau would be responsible for the search and selection of heads of public sector banks, and for Wholetime Directors and Non-Executive Chairman on the boards of PSU banks.
With the constitution of the Bureau, the government intends to professionalise the selection for tops posts at PSU banks. The idea is to improve the commercial performance and governance process of state-owned banks by appointing the right candidates to lead these institutions. As reported by The Indian Express in a series of articles this month, the performance of state-owned banks has deteriorated, while their non performing assets have increased sharply over the past couple of years.
In the last three years, public sector banks have written off Rs 1,14,000 crore, The Indian Express reported on February 8. After writing off Rs 53,100 crore in 2014-15, banks are expected to write off another Rs 52,227 crore this year. PSU banks’ gross NPAs are expected to jump 31.48 per cent in the fiscal ending March 2016 — to Rs 426,400 crore from Rs 324,300 crore.
Last August, while announcing a reforms roadmap called Indradhanush for the PSU banks, the finance ministry outlined the structure of the Bank Board Bureau, and said the Bureau would be constituted by March. In his speech during the Union Budget 2015-16, Finance Minister Arun Jaitley had announced setting up of an autonomous Bank Board Bureau to improve the governance of PSU banks.
The Bureau, which will in due course turn into a bank investment holding company, would also help banks develop differentiated strategies and capital raising plans through innovative instruments. State-owned banks need Rs 1.8 lakh crore of capital by March 2019, out of which Rs 1.1 lakh crore will be raised from the market, while the government has committed to provide Rs 70,000 crore, as per the finance ministry’s estimates.
A committee headed by former chairman of Axis Bank P J Nayak had in 2014 suggested setting up of a bank board bureau, which would be later turned into a bank investment company. The Bureau will replace the Appointment Board, which selects top officials for public sector banks.
The Congress raised questions over the decision to appoint former CAG Rai, wondering whether the appointment was a “quid pro quo” and did not violate Article 148 (4) of the Constitution. Article 148(4) says the CAG shall not be eligible for further office under the Government of India or of any state after he has ceased to hold his office.
Congress communication department head Randeep Surjewala tweeted: “PM confers Padma award, appoints ex CAG Vinod Rai as Chairman, Banks Bureau… Super Appointments Body for PSU banks. Does it not violate Art 148(4) of Constitution? Quid pro quo?”