New Delhi, March 19, 2018

Intervention may have pre-empted worsening of plight, records reveal

The Banks Board Bureau (BBB) had last year called for greater ‘organic linkage and dialogue’ with the Finance Ministry if the government desired to make the Bureau address public sector banks’ governance issues in a holistic manner.

The BBB on Monday made public a compendium of the recommendations it had made to the government in the two years of its existence. The Bureau was ready to address governance issues in PSBs and improve their output, but there was no response from the Ministry in giving such a specific mandate to BBB.

‘Organic linkage’

The call for greater organic linkage and dialogue was in the letter the BBB had sent Finance Minister Arun Jaitley on July 26, 2017, as part of its recommendations on the future role of the Bureau. The letter noted that the BBB was merely functioning as an appointment Board.

“The Bureau, as a body of experts on public sector banking, would be able to provide greater utility to the Finance Minister on matters relating to the governance and performance of PSBs, if there were to be greater organic linkage and dialogue with the Finance Ministry. At present, the body is merely functioning as an appointment Board,” said the BBB letter.

With very little effective interventions coming from the government to sort out the PSBs’ governance mess, things have turned worse in the Indian banking system, where nearly 70 per cent of the banking intermediation business is still transacted through these banks.

It may be recalled that the BBB headed by Vinod Rai came into being on April 1, 2016.

The BBB had in its July 2017 letter sought specific mandates among other things on PSB consolidation; asset quality resolution; and the rework of the Articles of Association of IDBI Bank.

[The Hindu Business Line]