BBB chief Vinod Rai slams govt for not moving on bank reforms, alleges communication breakdown

In the report, the BBB said that of the 13 objectives, there was no pendency at the level of the bureau in seven, two of them were dependent upon the implementation of its recommendations by the government, three were work in progress. The BBB sidestepped from its role in one.

The BBB chief also underlined extracts of a letter sent by him to Finance Minister Arun Jaitley on July 26 to set out a framework on the role of the BBB, seeking time for a meeting with the minister to discuss those issues, one of which included the need for “an organic relationship between the government and the bureau.”

“The bureau continues to await a meeting (with the FM),” Rai said in the footnote of the report.

Reforms recommended by BBB

In the wake of the over Rs 13,000 crore fraud at Punjab National Bank, Rai pointed out that India now deserves a public sector banking system which can offer a long-term sustainable growth rate rather than a public sector which is not risk averse and relies on the tax payer’s funds.

"To make this happen requires reworking of nearly five decades of institutional structures and processes which was put in place with the nationalisation of banks," Rai said.

This can be reworked even while the Government continues to retain at least 51 percent of the shareholding in PSBs recognising the strategic importance of Public Sector Banks in India’s developmental framework, he noted.

In line with Reserve Bank of India Governor Urjit Patel's suggestions as he broke his silence on the scam last week, Rai pressed for banking regulations being made independent of ownership.

“The bureau, as a body of experts on public sector banking, would be able to provide greater utility to the FM on matters relating to the governance and performance of PSBs, if there were to be greater organic linkage and dialogue with the finance ministry. At present, the body is merely functioning as an appointment board,” Rai said in his letter addressed to Jaitley.

Rai said the BBB was not aware of progress made on reforms as “there has been no further engagement with the government”.

In the letter, the BBB had suggested providing independent feedback to the FM on a half-yearly basis on the degree of implementation of its recommendations related to governance, reward, and the accountability framework.

Communication and implementation gap

The BBB said it was yet to hear from the department of financial services on recommendations made on reforms in appointments, compensation, performance assessment and governance over a year ago.

Rai had told Jaitley that the BBB would be able to reduce the “conflict of interests that the RBI finds itself in as a regulator and supervisor of the banking entities in the public sector”. “In this regard, the RBI’s role as a regulator and supervisor should be made ownership-neutral,” Rai said.

“While the government retains its majority shareholding, it is very much possible for the public sector to reach the same levels of efficiency as the private sector, provided governance regulations, supervision and the developmental agenda are allowed to be ownership-neutral,” Rai said in the foreword to the report.

The BBB had to sidestep from its mandate of helping banks in developing business strategies and capital raising plans after the government did not agree to its demands to allow it “to develop an independent perspective on stressed asset strategy and coordinated effort among PSBs towards recovery”.

The BBB even facilitated a meeting of all chief executives of public sector banks with the director of the Central Bureau of Investigation and the Central Vigilance Commissioner, which was co-chaired by the RBI governor and Rai. “However, since the government had not acceded to the bureau’s request for a specific mandate on a stressed asset strategy, the bureau stepped aside from making any further efforts in the matter,” it said.

As the tenure of the BBB nears its end, the Union government has set the ball rolling for the appointment of new members.

Finance ministry officials ruled out abolishing the BBB, which started functioning under its present Chairman Vinod Rai from April 2016 as an autonomous body to recommend improvements in governance at public sector banks.

Apart from Rai, its members include Department of Public Enterprises Secretary Seema Bahuguna, Reserve Bank of India Deputy Governor N S Vishwanathan, former Bank of Baroda chairman and managing director Anil K Khandelwal, former ICICI Bank joint managing director H N Sinor, and former Crisil chief Roopa Kudva.

Department of Financial Services Secretary Rajiv Kumar is the ex-officio member of the BBB. A search committee comprising the RBI governor and secretaries of the department of financial services and department of personnel and training may soon take a call on the new members of the BBB.