Vinod Rai backs PSB merger, calls it ‘good move’ by govthttps://indianexpress.com/article/business/banking-and-finance/vinod-rai-backs-psb-merger-calls-it-good-move-by-govt-5984545/

Vinod Rai backs PSB merger, calls it ‘good move’ by govt

Vinod Rai said the government’s decision last month to merge 10 state-run banks to create four larger and stronger entities was a “good move” that would lead to greater synergy among them and better governance.

Vinod Rai
Vinod Rai

Former chairman of the Banks Board Bureau (BBB) Chairman Vinod Rai Tuesday said the government’s decision last month to merge 10 state-run banks to create four larger and stronger entities was a “good move” that would lead to greater synergy among them and better governance.

Stressing that the BBB under him was consulted on consolidation and that the government did not just act on its own, Rai said, “We had suggested two models. First, merge large banks — say, for instance, Bank of India and Union Bank — and create an entity which is strong. Then you can merge small banks like Bank of Maharashtra or Vijaya Bank etc. The second model was (to merge) banks which were regional.” Rai, also the former Comptroller and Auditor General (CAG), was speaking at Idea Exchange programme of The Indian Express.

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Conceding that getting rid of extra staff to create a linear structure and fully reap the benefits of a merger was not possible in the public sector, Rai, however, asserted that once employees departed on their own, the staff cost of the amalgamated entities would fall. A “critical mass is required” so that the broader entities would have bigger balance sheets to recruit experts from the markets, lend to large infrastructure projects and better manage their human resources, he added.

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Rai, best known for overseeing audits for the 2G spectrum and coal allocation scams during the UPA regime, has come up with a new book titled, ‘Rethinking Good Governance: Holding to Account India’s Public Institutions’.

Asked if the fears of the three Cs — CBI, CVC and the courts — have stymied the decision-making of public sector bankers, Rai replied in the negative. The slowdown, he said, was perhaps due to more stringent appraisal process for bankers now than before. Rai — who served as the Banking Secretary for a while in the UPA government when “indiscriminate lending” took place, leading to the bad loan crisis — asserted that during his time no banker was asked to resort to “sub-prime lending”.

When asked about National Highway Authority of India never having set aside a mandatory sum half-yearly, meant for liquidating long-term loans from its income in reserve fund despite repeated prodding from the CAG, Rai said: “Parliament has not been successful in enforcing its accountability over the executive. Why? Because of the committee system (such as the Public Accounts Committee). Committee system has to be improved.” —FE