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Bankful of trouble PDF Print E-mail
Thursday, 29 September 2011 00:00
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At the height of the global financial crisis in 2009, several public sector banks picked up freshers from the IIMs for the first time. The IIM grads entered at a higher pay and the promise of a faster promotion channel, but two years later very few remain in these banks. The reason for their departure is not only poor career progression, it is also that even at a senior level, few will get the chance to demonstrate any initiative in their banks. In this context, when the finance ministry, as the owner of these banks, decides to make officers at younger age move across banks, it is to be welcomed. Shifting officers when they are in the middle management level will create a far bigger demonstration effect. That's the theory. The reality could be quite different. Postings have always been a controversial issue with most governments, and this government is no different. The controversies apart, the delay is significant—last heard, 60 board positions were vacant in 43 PSU, including 20 posts of the heads of PSUs; another 250 posts for independent directors are also vacant. In the banking sector, 22,000-odd vacancies remain even today. Handling the careers of so many bankers at one go could just as easily go the same way.

 

More important, the rigidity in the public sector banks is

largely due to the difficulties created by the political leadership that forces these banks to assume responsibilities they are not equipped to handle. An FE study shows that as on 2011, 13 bank chairmen have come into office with a tenure of less than two years. When the government at the Centre has insisted that key secretaries should have a tenure of minimum two years, allowing the public sector bank chiefs with a tenure of less than two years means the office is like a sinecure for the person. So the banks are on auto-pilot, depending on micro management by RBI or IBA for each of their key decisions. The fact that salary structures are common across banks adds to the policy problems banks face. Instead of trying to fix the problem by focusing on the promotion path of PSU banks, the finance ministry would do well to try to find ways to make their functioning more independent.

 

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