BBB proposes more freedom to PSU banks, incentives for staff

In its activity report released on Wednesday, the Bureau has recommended incentivising “maximisation of risk adjusted income and disincentivise operational inefficiencies by aligning compensation with right performance metrics through the introduction of ‘Performance based compensation’ through ESOS, which is different from Employee Share Purchase Scheme (ESPS) and Performance Linked Incentives (PLIs). BBB has also proposed empowering the non-official directors, including non-executive chairmen, to play the role of “independent directors”.

“Boards should be allowed to recommend personages to the government who could be considered for appointments to address specific competency gaps on the boards,” it said.

The BBB has recommended revamping of credit governance architecture in nationalised banks to reinforce efforts to minimise credit costs and enhance efficiency of credit allocation. It has proposed improvement in “the operating environment as well as the process for search and selection of directors to nudge and attract the best board level talent”. “Performance assessment of WTDs (whole-time directors) and senior management personnel should be undertaken by the Board,” it said.

On filling up top vacanacies in PSU banks, BBB said the vacancies which came up during the last six monthly period were filled up without delay. The only vacancy which could not be filled up on time was that of MD and CEO in Canara Bank for which candidates outside the public sector universe are also eligible. “The vacancy was advertised twice. However, it was met with less than enthusiastic response on both occasions. The Bureau made the recommendation for filling up of the vacancy on January 31, 2019. The Bureau has separately recommended to the Government the measures which may improve the pool of talent for filling up such vacancies,” it said.

To help nationalised banks take on the present and emerging challenges as well as help create a leadership pipeline, the Bureau has identified 75 personnel from a pool of 450 senior management personnel across nationalised banks. “They are presently undergoing deeper assessments after which individual development plans will be generated. Shortly, a globally ranked Indian institution will be identified where every year the identified personnel will undergo intensive leadership development journey, the BBB report said. “The tenure, reappointment and cooling off period of a non-executive director should be aligned with the extant Banking Regulation Act/Companies Act provisions. During the cooling off period, a non-executive director should not be appointed on the Board of any other PSB,” it had earlier said.

“Leadership is not a trait in abundance. It needs to be encouraged, groomed and retained. In private sector banks, a wholetime director can continue till the age of 70. The Bureau has therefore recommended that the tenure of an MD and CEO of a PSB be fixed for at least a three year period without being constrained by the extant age of superannuation but subject to performance evaluation for continuation, extension or re-appointment,” it had proposed.

BBB had earlier proposed that the Management Committee of the Board (MCB) should be reconstituted with only WTDs who would undertake the management function of the board.