Batting for greater autonomy
to state-run lenders, RBI Governor Raghuram Rajan today said the government
should look at them as truly "independent entities" that take their
own commercial decisions and not as an extended arm of the administration.
He also said that while it was fine
for the government to involve banks to further the social sector agenda, it
should ensure that such schemes should be financially feasible for the lenders.
"You cannot get a mandate and
cannot fund it. After all, public sector banks also have private shareholders
and are not any longer an extension of the government. They should be seen as
independent entities," Rajan said, addressing bankers at an annual
industry conference here.
"By all means, the public
sector banks are there to undertake social actions when necessary but those
mandates should be backed by financial gains," he said.
RBI is working with the government
on issues regarding the governance at central banks, Rajan said, adding: "We
are in constant dialogue with the government, we are discussing these issues on
governance improvement, etc and let us see how much progress the government and
the RBI make".
He further said that RBI has
forwarded the recommendations of the P J Nayak committee on corporate
governance to the government for necessary action. The panel called for radical
changes in the functioning of banks, including those within the top management
and running of boards.
Some of its major suggestion are
splitting the position of chairman and managing directors of the PSBs, giving
longer fixed terms to the top management, paying them market prices as
remunerations and having a transparent, merit-based system of appointments on
the boards.
"We have to change the
appointment process and expand the talent pool for management and boards of
public sector banks, it has to be much more transparent and driven by people
with strong capabilities. We have to strengthen board oversight and powers, boards
have to be empowered and made more accountable," Rajan said.
The comments come amidst a slew of scandals
plaguing PSBs involving top management. Last month, the CBI had arrested
Syndicate Bank CMD S K Jain for allegedly receiving a bribe of Rs 50 lakh from
Bhushan Steel to enhance the steel firm's credit limits.
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