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Showing posts with label Bank Board Bureau. Show all posts
Showing posts with label Bank Board Bureau. Show all posts

Saturday, 23 April 2016

11:22

Banks Board to look at MD appointments

Banks Board to look at MD appointments

The newly-constituted Banks Board Bureau (BBB) will soon begin the selection process for appointment of managing directors at state-owned banks.

“A tangible decision is selection of MDs. We will start that immediately,” BBB chairman Vinod Rai said  after the second meeting of the high-powered panel.

The Bureau was constituted earlier this year to select heads of state-run banks and  to help banks develop innovative financial methods to raise capital, including mergers and acquisitions. It replaced the earlier appointment boards for selection of public sector bank (PSB) heads.

Rai said, “We are at a very preliminary stage. We will tell you about our priorities, we will tell you about terms of reference, we will tell you how we will take it forward.”

The Bureau is looking at a host of issues, including consolidation, stressed assets and capital infusion. And, at bringing the level of non-performing assets and how to boost lending.

The first meeting was on April 8. It was attended by Union minister of state for finance Jayant Sinha and Reserve Bank governor Raghuram Rajan, in Mumbai.

Other BBB members are H N Sinor, former joint MD at ICICI Bank, Anil Khandelwal, former chairman at Bank of Baroda and Rupa Kudwa, former head of rating agency CRISIL. Ex officio members are Ameising Luikham, secretary of the department of public enterprises, and Anjuly Chib Duggal, secretary, financial services.

BBB was one of the seven elements of the government's 'Indradhanush' strategy to revamp the functioning of state-run banks. It includes re-capitalisation, de-stressing of assets, empowerment, a framework of accountability and governance reforms.

The government will recapitalise PSBs with Rs 25,000 crore in 2016-17, followed by Rs 10,000 crore each in FY18 and FY19. It infused Rs 25,000 crore in 2015-16.



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Friday, 8 April 2016

22:05

Bank Board Bureau's 1st meet today: What's on agenda?

Bank Board Bureau's 1st meet today: What's on agenda?

The newly appointed Bank Board Bureau, headed by former CAG Vinod Rai, will hold its first meeting today in Mumbai.

RBI Governor Raghuram Rajan along with the Minister of State of Finance Jayant Sinha are also expected to be a part of the meeting to discuss the revamping strategies for seven public sector banks.
In an exclusive interview with CNBC-TV18, Leo Puri, Managing Director of UTI Asset Management and Usha Thorat, Former Deputy Governor, Reserve Bank of India, threw light on what could be the agenda of the meet.
The experts say that the bureau has primarily three tasks to complete- governance, capitalisation, improving industry structure.
The sequence of these three tasks matter, said Puri, adding that some steps have been taken in each direction.
Puri added that the board should look at strengthening the governance first and then shift focus to capitalisation and then consolidation. However, he maintained that given the urgency of the situation and the limited fiscal capacity, the government looks inclined towards exploring the industry structure first.
Usha Thorat believes that BBB should fill up all the empty seats in most of these banks by bringing in people at the director level and and complete the appointment of chairman and non-ex chairman, along with optimising leadership skills and human resorces.
Below is the verbatim transcript of Leo Puri and Usha Thorat’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: What is the best way in your assessment for the bureau to go about the revamping of the public sector banks?

Puri: I think the bureau has three tasks broadly. There is governance, capitalisation and consolidation if you like or improving industry structure. I think the issue that I assume they will discuss today in terms of priorities is in what sequence does it make sense to actually achieve these goals. I think as of now you can see that there has been some steps taken in each direction, little bit of governance improvement, little bit of capitalisation and some talk of consolidation.

Ideally, of course you would want to if in a perfect world, work to first strengthen governance and then essentially think about capitalisation and industry structure would follow. However, given the urgency of the situation that we have and given the limited fiscal capacity and the limited ability of the market to support capitalisation, the government appears inclined to seriously explore industry structure as the first step. So, it will be interesting to see how that sequencing actually plays out today.

Latha: How would you put the sequencing, what should be the priority for Bank Board Bureau (BBB)?

Thorat: I sort of feel also with Leo Puri that normally the governance structure, the capitalisation and then looking at the overall structure would have been a more logical sequencing. However, it is not necessary to do it exactly one after the other, the thought processes can go on simultaneously. So, I feel that there are vacancies currently in many of the individual bank board’s which I think the priority of the BBB should be clearly to fill those up because they are hampering the operations of the banks.

I think even despite all the consolidation, ultimately these things do take time; consolidation is not an overnight process. So, in the interregnum you are going to have these banks functioning. So, I feel it is extremely essential to strengthen the banks boards, bring in some professionals at the director level, finish the appointment of the CEO or the Managing Director wherever they are necessary and complete the non-ex chairman appointment. I think that is clearly to me a priority.

Secondly, as far as the infusion of capital is concerned and that is where the concern comes from and that is where what is driving this whole consolidation is because it does sort of seem to -- capital is scarce, capital is costly and it is necessary to conserve capital and currently you have a huge amount of duplication, overlapping. What is more, you have to optimise the leadership and the human resource skills also which are quite in short supply. After all leadership skills are not so available in banking and having them over 19 banks is a tough call and all kinds of wasteful competition amongst banks.

So, this is what Narasimham Committee was had suggested way back and I think it has just been delayed. So, the other argument, I am not getting into argument of consolidation but I do feel that the urgency given to consolidation, the seriousness with which government is setting about it, I think is important.

Sonia: From a stock market point of view, there is a bit of concern about what the impact or the damage from the write downs will have to be that some of the larger banks will have to take as and when they take over the smaller bleeding PSU banks. In your mind what could the impact be, I am not trying to put any number to it but how damaging could it be?

Thorat: I think in any consolidation it is important that the merged unit is stronger than the sum of the individual units put together. It has happened and we have the case of the IDBI as well in India where the merged unit lost its strength. So, it is very important that it won’t pull down what are the already relatively stronger banks within the system.

Now, you might ask me there are signs of weaknesses in all the banks so which ones can you say are relatively stronger. However, for that we have to go over systematically, the weakness, because some of the banks have got better credit underwriting systems as a systemic thing and some have definitely been on the weak bank list for ages. So, somewhere we have to take the concept of a narrow bank and let the weak banks which have got inherent weaknesses really shrink. Therefore the capital should be really deployed in the banks which have, I would not be able to say but certainly have seem to have done better with the capital.

So, it is very important I feel in capital infusion and consolidation that is the reason why the government is I think thinking of it together. However, it doesn’t happen overnight and in the meantime you have to give a direction to the banks. So, I think that is where the struggle and the challenge is.

Latha: You correctly pointed to the example of IDBI Bank where the erstwhile IDBI Bank actually was a strong fellow who got swamped into the larger one which had more problems. Therefore, would you expect that the Bank Board Bureau should allow some of the smaller PSU banks to simply become what they call niche banks, just squeeze out capital till they turnaround and not poison a bigger bank with them?
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