Delay In Appointment of ED and CMD

Predicament of bank bosses -The Hindu
(Read my Views Below)

The NDA government has scrapped a list of eight names who were shortlisted by the UPA government to head public sector banks (PSBs). This means these banks are likely to remain headless for at least another three months. This is the minimum time it takes to fill up the posts — identifying eligible candidates, calling for applications, interviewing and finally getting the names cleared by the Central Vigilance Commission (CVC). An accelerated selection process announced by the Finance Ministry last week is unlikely to make much of a difference.

 

Inevitably, the business of these banks will suffer. The executive directors, who will be asked to officiate, cannot be expected to show the same kind of dynamism that the ‘permanent’ CMD exhibits or supposed to exhibit. It will be entirely normal for them to bid for time, and pass on the baton without rocking the boat. Who would like to take on a well-connected tycoon who has defaulted when all he has to do is warm his seats?

 

There is another fall-out from this episode. The bank executives, who were selected earlier and now dropped from the list, are not exactly duds. Besides, they have climbed that far to reach the position of EDs. However cynical one may be, most of them have merit of their own and their rise is not entirely due to politicking. And not to forget, all of them would have cleared hurdles, even stiff ones such as vigilance clearance. Wasn’t S. K. Jain cleared by the CVC before he became CMD of Syndicate Bank? Only to be caught, as the CBI alleges, of brazenly negotiating a bribe?

 

Opaque procedure

The government’s action creates uncertainty. If the selection procedure always lacked transparency, it has become even more opaque. The government has shown very little appreciation of the concerns of the PSBs. A mountain of bad loans confronts these banks. All of them have to raise huge amounts of capital to meet their international capital adequacy standards.

 

Headless organisations cannot provide the leadership, or, for that matter, accountability. On the government’s side, it is likely than an overburdened Finance Minister could not accord the attention the appointment of bank CMDs deserves. In any case, the present episode of vetoing names chosen by the previous government cannot be viewed in isolation from the reality of public sector banks and their governance.

 

Government ownership

Given the ownership structure of these banks, appointment or removal of their CEOs is the government’s prerogative. In all these banks, the government is the majority shareholder. There is every indication that the NDA government will not let its stake in any of these banks to below 51 per cent — the limit beyond which no PSB can dilute its shares.

 

There is, in fact, a political consensus that the ownership structure will remain so. Various legislations have sanctified this arrangement. Thus, despite some strong economic reasons to offload its stake, the government is unable to do so. The need to measure up to the new international norms of capital adequacy calls upon all banks to infuse substantially more capital. The obvious solution to dilute government stake and increase non-government holding is simply not acceptable.

 

At different points in time, various committees and expert groups had suggested bringing down government equity to below 51 per cent but at the same time retain their public sector character. The latter is meant to ensure furtherance of social objectives such as in the recent implementation of the massive financial inclusion programme, Jan-Dhan Yojana. The latest in a series of such expert groups, the one headed by P. J Nayak, a former Axis Bank head, recommended vesting of government shares with a holding company. The committee claimed that its recommendations will have the salutary effect of freeing these banks from day-to-day micro management by the government.

 

Will the new arrangement pave the way for a new breed of bank chiefs, who can be compensated adequately according to market rates and are not cowed down by government interference? Though for now a theoretical proposition, it is a tantalising thought. But alas the answer has to be in the negative for various reasons.

 

As it happens in the private sector too, the majority owner — the government — calls the shots in the PSBs, especially in matters such as top-level appointments. However, there is a way of selecting or removing the heads of institutions that you want to nurture. It is in that context one refers to the news item regarding dropping off names from the shortlist prepared by the previous government. The decision seems more akin to withdrawing governors selected by the UPA. But unlike in the case of governors, replacements have not yet been found. The travails of a PSB chief may actually begin with the appointment but that is another story. The point to note is that a bank chief’s travails are also those of the bank and its customers.

 

My Views on delay in appointment of ED and CMDs of few banks: 

 

It is very much necessary to remove corrupt officers from all top posts and from all middle management or senior management cadre. Only then we may hope for real reform in public sector banks. Asset quality of public sector banks has been moving from good to bad and from bad to worse and worst  every quarter and profitability of each bank is at stake. Majority of top officials who have acquired top post or who have got promotion only by using evil means promote evil culture down the line also and hence they cannot be expected to save and protect their banks.

Seniors and good performers are rejected in each promotion process taking place either for the post of ED or CMD or from one scale officer to higher scale officer. Bad officers manage promotions by paying bribe or by using recommendations from some VIP or the other. Such evil culture has become the tagline, timeline and lifeline of Human Resource Management in Public Sector Banks. This is why such public sector banks are facing capital erosion ,  downtrend in profit and less business growth compared to their counterpart in private sector. In Public sector banks officers have to work for the welfare of their bosses whereas in private banks , officers have to think for welfare of their bank or to see the exit route.

 

As such heaven is not going to fall even if a bank remains without ED or CMD for a few months or few years if the reason behind the delay to ensure corruption free promotion processes. GOI will have to ensure corruption free promotion process for all promotions and postings if they are really interested to remove corruption from India. Past record of ED and CMD do not prove that they saved the bank or they could restrict growth o bad debts or NPA. Looters may not be saviours.

I rather praise Modi led Government that they showed courage to cancel a list of ED and CMD prepared by previous corrupt government. If they go deep and peep into past processes honestly through CBI , I think 80 percent of promotions which took place in past ten years will have to be cancelled. Hardly 20 percent of promotions ae given to good people to show the mass that honesty is the best policy. It will not be an exaggeration to say that honesty has become a curse for good performers in these banks. A few officers (20 percent referred in above lines) who are real performers are promoted only to clean the dirty work of officers who were promoted based on flattery and bribery and who are near and dear to top bosses. 

 

Some critic of the government say that bank will not grow or will not be in a position to recover money from bad borrowers. It seems to me people who are criticising government for delay in posting of ED and CMD are either part of rejected waiting list prepared by UPA government or their agents or they want to perpetuate the culture of promotion based on flattery and bribery . They forget that present pathetic state of affairs prevailing in almost all PS banks is caused by only corrupt officials and ministers who worked in nexus with each other to loot banks for their self interest. They continued to hide bad debts and manipulate balance sheet to book artificial profit, to inflate business by window dressing and it is they who completely ignored common men to serve big corporates .

There is no doubt that majority of retired ED and CMD booked fake business and fake profit to earn false name and fame and it is they caused loss to taxpayers, honest bank officers and bank customers.

Such corrupt people cannot protect banks , rather they may further cause damage . It is therefore far better if the appointment of ED and CMD is delayed to ensure justice for good officers. Even now many of Top officials are projecting good image of their bank mainly by window dressing in their books of account and I hope their evil work will also be exposed in near future slowly and gradually and phase wise.

 

Root of corruption goes deep and the Ganga of corruption flows from top to bottom only. Ministers under previous government during last ten years in nexus with bank officials only promoted bribe and flattery culture and this bad culture has resulted in growing sickness.

Good people of banks think it better to remain silent spectator of every loot and ill-motivated lending undertaken by top officials directly or through their subordinates. All could happen only because promotions and posting used to be based on not quality and quantity of performance but quality and quantity of flattery and bribery.

Last but not the least, I do not hesitate in saying that it is the gang of corrupt CMDs of PS banks who are not allowing wage settlement to take place with respectable hike. They please their mentor ministers by maligning image of staff and taking credit for not giving a due hike. They first see their posting after retirement and this is why most of top flatterers get lucrative placement even after their retirement from bank as CMD. It is these CMDs who are part of IBA , a negotiating body for wage settlement who are humiliating bank staff by offering too low hike.

 

 

Therefore wage hike will be better if somehow or the other bank officers get time to talk directly to Mr. Modi and Mr. Jaitley.