Two private sector banks — ICICI Bank and HDFC Bank — that were incorporated in 1994 saw their profits cross the Rs 10,000 crore mark during the financial year ended March 2015, with both banks effectively doubling their profits over the last three years. No public sector bank other than the State Bank of India (incorporated in 1955) has breached that mark, with even Bank of Baroda and PNB, second and fourth largest banks by deposits, clocking net profits of less than Rs 4,000 crore. To make matters worse, several of them are forced to operate without a full-term MD and chairman for extended periods of time.
Even as the government has been talking of autonomy and professionalising bank managements and boards, it’s still a long road. Currently, as many as five public sector banks do not have a full-time CMD in place and the list includes — Punjab National Bank, Bank of Baroda, Syndicate Bank, Andhra Bank and Canara Bank. Two more posts will fall vacant in the next two months — Bank of India and IDBI Bank. But it’s not just banks. Even key institutions such as the CVC and CIC are also operating without a chief for over nine months now.
Central Vigilance Commissioner Pradeep Kumar completed his term on September 28 last year. The CVC is headed by a Central Vigilance Commissioner and has two Vigilance Commissioners.
Chief Information Commissioner Rajiv Mathur completed his tenure on August 22, 2014. Apart from the top posts at both CVC and CIC, the government is yet to appoint three information commissioners and two vigilance commission officers.
When contacted, a senior ministry of Personnel official attributed the delays to a litigation in the Supreme Court on the appointments of CVC and Vigilance Commissioners. He said the process for appointing the chief information commissioner was underway and public advertisements had been issued. Governance and appointment of a leader with a long-term vision continues to remain a major issue at government owned institutions and insiders point that the appointments are not based on merit but are also politically motivated.
Situation at PSBs
Taking the private sector as a case in point, while Aditya Puri has been managing director of HDFC Bank for more than 20 years now, Chanda Kochhar has completed six years as MD and CEO of ICICI Bank. She had succeeded KV Kamath, who had been the CEO of the bank for around 13 years.
Against this, while five public sector banks do not have a full-time CMD and several EDs have to be appointed, these appointments are for far shorter terms than those of private sector banks. “Decision-making will get further stalled, especially the bold decisions,” said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services.
While the government has split the post of MD and chairman, Parekh said that the issue of considering outsiders for the role is just unsettling and was not part of the recommendations of the PJ Nayak committee.
While bank unions are also raising their voice against this, they feel that the issue of keeping banks headless and not being able to appoint a chairman, a managing director and executive director is affecting the working of a bank. Some are suggesting that the government should atleast push the appointment of MDs and EDs so that the operational work continues.
“MDs and EDs perform routine, operational functions on a daily basis and delaying their appointment is leading to a situation where the bank will suffer operationally and will also have no direction going forward,” said CH Venkatachalam, general secretary, All India Bank Employees Association.
While the government has been talking of autonomy and professionalisation of bank’s management, insiders feel that nothing much has happened on that front too.
“Never have we seen the government plan for appointments to be made for positions that are set to go vacant. Also even as the government talks of giving autonomy to bank’s, it always treats them like their extention,” said Venkatachalam.
But that is not the only factor that is affecting the performance of PSBs and insiders feel that there is also the CAG audit that lingers on the senior management’s mind, which hinders them from taking any decision.
While their private sector counterparts take a board approved decision to settle a case of bad loan, in case of a government owned bank, that decision is delayed by the chairman and managing director because of any future enquiry and leave it tobe taken by the next chairman.
“The issue of CAG audit and CVC is the single biggest concern for NPAs as the management has no appetite to take settlement or rehabilitation decisions in such cases and thus there is a delay in decision taking, “ said a former managing director at State Bank of India.