• MARCH 7, 2000

Government prepares blue print for autonomy of banks

The government has started the valuation of the assets of PSU banks as these banks would soon start tapping the capital markets to reduce the government's holding. In addition the government is also preparing a blue print for providing autonomy to these banks.

The following measures would be adopted in the blue print:

  1. The role of chairman and managing director (CMD) would be bifurcated into part time chairman and full time managing director.
  2. The board would be responsible for making only policy decisions.
  3. The number of non-executive directors to be increased to at least 25% of the board strength.
  4. To strengthen the management committee of PSU Banks
  5. Day to day operations to be delegated to chief general manager and the general managers.
  6. Accountability of bank management to be increased. Corporate governance practices would be incorporated and directors would be made more accountable.

The move to provide greater flexibility and autonomy to banks in formulating their corporate strategies will pay off in the long run as they will be in a position to take quicker decisions. As the blueprint proposes that the day to day running would be left to chief general managers and general managers the operations of the banks would be free from bureaucratic delays.

However as the PSU status of these banks is likely to continue they would be burdened by problems related to PSUs and hence will not compete on a level playing field with the private sector banks.

Though the government is keen to undertake the above measures whether they have the strength to do so remains to be seen. This is because the employees of the PSU banks would be averse to privatisation of these banks.

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