Implementation of Nair Committee report a must for banking reforms, says Ex- RBI Dy Governor

Mundra says financial sector is prone to mishaps and a knee jerk reaction disproportionate to problem is not the answer

GN Bureau | September 7, 2018


#Nair Committee report   #RBI   #banking   #NPA  


Recalling his thoughts at the Governance Now 1st India Banking Conclave in 2016, when former Reserve Bank of India deputy governor, SS Mundra had said banking sector reform is a journey and not destination and later at the second edition of the conclave in 2017 he had emphasised on appreciating the prescriptive with which reforms are initiated, Mundra has asserted that  it was important to adopt the framework set by Nair Committee Report for banking sector reforms and unless that happens it would be futile to talk about small measures in the nature of band aids.

“We are now past that stage. It could take five to ten or may be 15 years with clear, articulated road map with commitments for its implementation,” he said.

Mundra was giving his special address at the Governance Now 3rd India Banking Reforms Conclave: Rebooting Banking with Reforms and Digital in Mumbai on Friday.   

The former RBI DG suggested three steps to implement the blueprint. In the first step, he said the government ownership in individual banks could be transferred to a holding company. In the second suggestion he said the holding company may reduce its majority stake in individual banks. Mundra said the government also ceases to be majority owner of a holding company itself in the third stage.     

He also said the tenure of the CEO of a public sector bank can be long enough to put in a meaningful performance in place. He added the performance could be reviewed after three years to assess if it can be extended by another two years.

He said financial sector is prone to mishaps and a knee jerk reaction disproportionate to problem is not the answer.

Referring to recent reports on finance ministry asking all banks CEO’s to examine frauds in all NPA cases above Rs 50 crores, Mundra said it may be fine but holding CEO’s responsible for criminal conspiracy for not being able to detect frauds, if these are detected by an investigating agency subsequently though well-meaning, is stretching it too far.

“While it is a good indication that independent directors should not be only satisfied with what is  brought to them but they should learn to have the art of seeking the right information and question, holding bank management and board responsible  may not be correct,” said Mundra, adding that a strong organisational culture  and giving a meaningful ear to voices of middle and lower level staff is equally important.  

Managing director and CEO, BSE Ashish Kumar Chauhan, asked if a bank exists for society or society exists for banks. He said the world is changing very fast and a bank is a bundle of services provided by an organisation for a variety of reasons.

While speaking on the stressed assets he said, “What should have been reformed post liberalisation is now coming back to haunt us. The total lending of commercial banks in India vis a vis GDP is  50-60 per cent out of which total stressed assets are around 100-150 billion dollars. As compared with China the total banking and non- banking system vis a vis their GDP is 300 per cent.”

“Have the banks become so big that they have to be saved at the cost of society” asked Chauhan as he said that making users more responsible will also make banks responsible. In future when banks fail, society should not pay up. We need to anticipate the future and create policies so there are no further accidents.”  

Chauhan said looking forward, lower cost of transactions to provide unbundled services will change how we look at the banking sector.

Speaking on strengthening the rural economy part time director, Reserve Bank of India, Satish Marathe said that RBI has 4.50 lakh business correspondents in rural areas and 1.4 lakh in urban areas. “It is important  to increase income levels in rural areas particularly the poor for sustainable growth. Despite 50 per cent Jan Dhan Yojana accounts holders being women formal  linkage assistance to financial assistance is very  low. Unless we support micro entrepreneurs,  desired growth will not happen.”

Marathe also said that with more than 65,000 primary agriculture credit society (PACS), these need to be strengthened not only for financial services in rural areas but also cut off areas like the North-East and Andaman and Nicobar Islands. He also called for strengthening educational institutions in rural areas along with having mobile branches with ATM’s and digital banking services.

Emphasising on the importance of having regional languages for financial inclusion Marathe said that we need to have video programmes on financial literacy in all regional languages along with Indian languages. “With over 700 districts, services are not up to the expected level. Mobiles are not available. The rural population will have to be encouraged to use smart phones and hand held machines. RBI will be concentrating on rural India and while we have substantial urban poor, use of Indian language is a must for financial inclusion’ he said.     

Comments

 

Other News

Cyber frauds helpline has helped save Rs 930 crore

Since its inception, Citizen Financial Cyber Fraud Reporting and Management System has witnessed more than 12.77 lakh complaints registered (till November 15, 2023), and has saved more than Rs. 930 crore in more than 3.80 lakh complaints. This was stated by minister of state for home affair

COP28 discusses climate resilient development in Himalayas

Impacts and implications of Climate Change Vulnerability in the Himalayan Region and ways of creating ‘Climate Resilient Development in Indian Himalayan Region by making mountain communities green and resilient were discussed the side event hosted at the India pavilion at the UN Climate Conference CO

Air Pollution: What needs to be done to tame the silent killer

Air pollution in Delhi has been in headlines, as every year in recent times. Mumbai too has suffered from air pollution, despite being a coastal city. Apart from many other metros such as Bangalore and Kolkata, tier-I and -II cities and rural areas also have high pollution levels. Every year reports and st

Free food grains for 81.35 cr beneficiaries for five years

The central government will provide free food grains to about 81.35 crore beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for a period of five years with effect from January 1, 2024, the cabinet decided on Wednesday. Terming it as a “historic decision”, a

“I wrote ‘Survival at Stake’ to provide food for thought about solutions”

Survival at Stake: How Our Treatment of Animals Is Key to Human Existence By Poorva Joshipura HarperCollins, 328 pages, Rs 499 With science now recognising animal consciousness, intelligence, emotion, and even morality, there must rise an awareness of

‘Bon Voyage’ through the Arctic: Exploring new horizons for India

India`s tryst with trade through the Arctic regions, including the Northern Sea Routes (NSR), has become an impact-making endeavor recently. The Arctic of yore is now a pivot – point of geopolitics, of climate change discussions, and for economic opportunities; 40% of oil and gas reserves said to be

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter