Nothing wrong done, board members a liability: PSB

The PSB management has alleged that the independent directors have been influencing the banks working, which is not in the interest of the bank. They have been putting pressure on the bank to avoid the bidding process for sale of debt and asked to go in for a settlement, which reduces the amount a bank can generate from such a sale,

analysts said.

For example, a letter issued by the All India PSB Officers’ Union says that due to pressure from political directors, a bid of Rs 59 crore relating to the sale of properties of the Skipper group was not allowed to be accepted. Due to this, a fresh bid for sale of debt was invited this June 20 that received just one bid of Rs 24 crore. The bank has thus registered a loss due to non-acceptance of a previous bid of Rs 59 crore.

The Skipper group belongs to Tejwant Singh who dishonoured the settlement reached for Rs 5.3 crore against the total outstanding of Rs 5.1 crore in 2004 that led to the auction. The letter says the loss made by the bank is because of the influence of political directors. In the meantime, Tejwant Singh has filed a petition with the Supreme Court to revive the old settlement of Rs 5.3 crore that was valid till July 2004.

The issue of corporate governance has risen several times in state-run companies. But this time round, in PSB’s case, it has gone a little far and that is one reason why the PSB management is demanding a reconstitution of the board. Ever since the GOI notification dated Feb 19, 2007, regarding the constitution of the management committee came up, the nominees of RBI and the Government of India ceased to be part of the management committee. Now the committee comprises five members. Three are the chairman and managing director, ED and a workmen’s director, and the remaining two have to be independent directors out of the five independent directors that have been nominated by the Government of India.

They have no professional qualification that would allow them to provide the bank with any valuable input, said the bank management.

A letter written by R P Singh to the RBI Governor says: “When we do not have professionally qualified independent directors on board, the removal of RBI/ GoI nominees from the management committee has proved counter-productive and, hence, they should be allowed to be nominated on our management committee.”