BBB favours 6-year fixed term for MDs of PSU banks

To ensure greater stability and accountability, Banks Board Bureau (BBB) chief Vinod Rai today suggested that managing directors of the public sector banks should be appointed for minimum 6 years.

He also said that employees of the public sector banks will get higher perks from next fiscal so as to attract best talent from the market.

"Also the attempt is being made with idea to enthuse accountability in the system to find executive director or whole time director or a CEO at an age where he has got a minimum of 6 years or more to go in the institution so that he can be held accountable for the decisions," Rai said.

"A large number of problems have risen because the tenure of the people were very short, maybe 15 or 18 months and left behind a while trail of decisions which are being questioned now. If we provide 6 years of tenure to the professional, he will do their business with great degree of accountability that they are going to be subject to," he said.

BBB was set up as an advisory body by the government last year to recommend on appointment of directors in public sector banks and advise on ways to raise funds and merger and acquisitions to the lenders among other things.

At an Assocham event here, Rai said, BBB is also thinking of the fact that the compensation package across the board of public sector banks needs to be improved.

"Maybe we are not able to do much with the fixed part of compensation package but variable part we are hopeful that in the next financial year we will be able to introduce a far more attractive package which do have bonuses, ESOPs and other performance linked incentives as part of the package," he said.

It may be monetary or non-monetary benefits to make it more attractive for professionals to enter into public sector banking space, he said.

Pointing to the P J Nayak Committee report, former CAG Rai said it had suggested that banks should be hived off into a holding company to ensure that they are free from government or political interference.

"The government hives off the stakes and put it into a holding company, bank investment company or whatever name and this holding company is made to be run by professional persons who have experience of running the bank...once these professionals are appointed, the bank is allowed to run by itself," he said.