One-third PSBs will be without a formal head if the vacancies are not filled in six months
Shishir Tripathi | October 21, 2014
Close to eight months have passed since Archana Bhargava, chairman and managing director (CMD) of the crisis-ridden United Bank of India (UBI) took voluntary retirement, but the bank is yet to get her successor. This is not an isolated case. Five other public sector banks (PSBs), including Bank of Baroda and Oriental Bank of Commerce, are also functioning without a CMD.
While the heads of two of these PSBs retired recently, CMDs of three banks retired months ago, but the government continues to drag its feet on filling up the vacant posts.
According to industry sources, the appointments are on the anvil and can be finalised by the end of October. They say the delay is probably due to the government’s proposed move to bifurcate the post of chairman and managing director in PSBs. The splitting of the CMD post has been recommended by various committees and some of the past RBI governors. “It is obvious that no organisation can remain headless for a long time. The government has paced up work on the appointments and by the end of the month most of the vacancies will be filled,” said a government official.
In August, the ministry of finance stated that it was thinking of splitting the CMD post for ensuring good corporate governance. It also proposed to make the selection procedure more stringent. If the bifurcation is done – which seems to be the probability owing to the high level of corruption prevalent in PSBs which has come to light with the arrest of Syndicate bank CMD SK Jain in an alleged bribery case – then the appointments to the vacant posts might be further delayed.
The Reserve Bank constituted a consultative group of directors of banks and financial institutions under the chairmanship of AS Ganguly, to review the supervisory role of boards of banks and financial institutions. The group submitted its recommendations in April 2002. One of the major recommendations of the group was: “In order to ensure strategic focus it would be desirable to separate the office of chairman and managing director in respect of large-sized PSBs.”
Though PSBs are yet to follow the recommendations, in 2007 private sector banks had implemented the suggestion.
While six banks are working without their designated heads, CMDs of Vijaya Bank, Punjab National Bank and Allahabad Bank are due to retire within six months. If by then the current vacancies are not filled then one-third of the total PSBs will have to function without a formal head.
This story appeared in the October 16-31, 2014 print issue
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