Consolidation, even if slow, has started in banks: Vinod Rai

As the worst, in terms of bad loans, gets over in public sector banks, the Bank Board Bureau chief Vinod Rai says that the immediate focus now is on cleaning up balance sheets.Speaking to CNBC-TV18’s Latha Venkatesh, Rai says: “Entire focus is on cleaning balance sheets, so that loaning process starts immediately.” The other key concern is filling up gaps between appointments in these banks.Recognition of stressed assets is now over and what remains are some residual effects. Consolidation, even if slow has started in banks, he says.The board has also been recommending whole-time directors for stressed banks, which have been accepted by the government. The government’s promise of complete autonomy to the board has been fulfilled, Rai adds.Below is the verbatim transcript of Vinod Rai’s interview to Latha Venkatesh on CNBC-TV18.Q: Can you tell us more about reform appointment process in public sector undertaking (PSU) bank boards.A: We have started only three months back and we have already started recommending whole time directors and chairpersons and in fact all the recommendations as of now have been accepted by government. So, to that extent the Bank Bureau, the autonomy promised to the bureau has been granted by the government.Q: My point was that what is the next game or the end game, has the Bank Board Bureau thought out how you will have eventually independent board members for each bank which will have a greater say in their appointment of their own CEOs? How long will it be that you will be appointing the CEOs? What are the next steps you are seeing to institutionalise the powers of the banks, the boards of the various banks?A: As of now the Whole Time Directors and the CEOs of the banks are appointed by the government and in government the appointments committee of the cabinet does it. However, for us we have still not mapped that road where the Bank Board Bureau will become a bank investment company, a holding company some point of time depends upon, it is far too early for us to -- because at present we are struggling with other issues. This is an issue which can certainly take back seat for the time being.Q: What would you say are the top three points that you are working with to strengthen public sector banks?A: Immediately our entire focus is on ensuring cleaning up with the balance sheet with a view to ensure that the lending process starts immediately because that seems to have got into some kind of a tight fit where banks credit is not growing. So, we want to ensure that the credit growth takes place, so we wanted balance sheets to be cleaned that is number one.Number two to ensure that there is no gap between appointments in the banks. There have been instances in the past where there are huge amount of gaps. We are ensuring that we take timely action that those gaps don’t occur and these are our priorities for time being.Q: Important priority of the Bank Board Bureau is to look at the quality and asset quality of bank balance sheet what is the sense you are getting -- a lot has been recognised -- is the hump over or may we have a long tail?A: I would sincerely believe that recognition has taken place and the worst is over. What may remain is consequential stresses that have arisen but I think the worst is over.Q: Holding company owning all the shares and the banks being owned by something like Sovereign wealth fund which was one of the plans which even PJ Nayak spoke about is that not something that was discussed with the bank bureau to make all the public sector banks units held by the holding company?A: In the terms of reference, which have been given to us that is not mentioned as yet. However, that was one of the recommendations of the Nayak committee but that is not transmitted in terms of reference which has being given to us.Q: I thought consolidation definitely was, is that taking off, should we hear something in a quarter or so?A: Consolidation has taken off.Q: But only within the State Bank family not outside.A: That probably is a low hanging fruit. However, you can’t have all kinds of actions taking place at the same time. I think it will be very unfair and I have said it early also to settle the banks who are stressed at present on the loans and the balance sheet with consolidation also.