Appointment of bank chiefs: Many questions unanswered


One chairman and managing director (CMD), one deputy managing director (DMD) and 17 executive directors (EDs) of public sector banks met three panels, for 20 minutes each, at the Reserve Bank of India (RBI) headquarters in Mumbai last Friday. They have been competing for eight top posts in state-run banks.

This is the first instance of prospective CMDs of public sector banks being interviewed by so many panels after the Bharatiya Janata Party-led government scrapped the selection of six public sector bank heads and 14 executive directors, following the recommendations of a committee, formed to examine the selection process of the CMDs and EDs in 2014-15. The Central Bureau of Investigation (CBI) had found that the appointment of Syndicate Bank’s former CMD S.K. Jain was not appropriate. Jain was suspended in August after he was arrested for allegedly accepting a bribe and sacked in September.

The composition of the three two-member panels is not uniform. For instance, two bureaucrats of the finance ministry are on two panels and an RBI deputy governor is on the third. Two retired public sector bank chiefs are there on two panels as the second member, while the third one is an academician from an Indian Institute of Management. So, instead of being interviewed by one panel for about 10 minutes, this time around, the time spent by each candidate with the three panels is around one hour. Hopefully the questions asked were different and the assessment covered a wider canvas.

The final selection of candidates will be made by the appointment board, chaired by RBI governor Raghuram Rajan, based on the weighted average marks given by the three panels.

Last time, 19 candidates had appeared for interviews for six vacancies of CMDs. Nineteen candidates fighting for eight top posts does not make much of a difference and the eligibility criteria remained more or less the same. One is tempted to ask certain questions. For instance, why was only one existing chairman chosen to be interviewed for lateral movement? I am told, as on 1 April, Ashwani Kumar, CMD of Dena Bank, is the lone banker who had completed one year as a chief and this is why he was called for the interview.

Now, for which bank will he be considered? Bank of Baroda? Punjab National Bank? Or, Canara Bank? All of them are fairly large banks. If he is chosen for one of them, why will executive directors be chosen to head the other two large banks? What is the logic behind sending the chairman of a relatively small bank to head a larger bank and, at the same time, selecting executive directors to head equally large banks?

On what basis were these executive directors or DMD of a bank called for the interview? I am told a few of them do not have two-year residual service. This means if the government does not change the norms and give a fixed tenure of say, three years to a public sector bank chief, there would be bosses who would run banks for less than two years.

The main problem lies elsewhere—the lack of talent. According to the 2010 Khandelwal panel—set up by the government to look into the human resources issues—in five years till 2015, about 80% of general managers, 65% of deputy general managers, 58% of assistant general managers and 44% of chief managers of public sector banks would retire.

Between mid-1980s and 2000, public sector banks did not recruit anybody and today this is reflected in the talent pool. I would like to believe that the appointment process will be transparent and fair but this does not necessarily ensure a dramatic change at the top level of public sector banks. Perhaps it is high time the government opened up the corner room at these banks to the market.

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