Govt draws up 7-point reform plan for PSU banks

The government, which has announced a plan to infuse Rs25,000-crore fresh capital in state-run banks in the current financial year, has now come up with a 7-point reform plan that it said would better equip the banks to manage their finances well.

The 7-point reform plan unveiled by finance minister Arun Jaitley and senior officials of the finance ministry, involves a review of the basis of appointments, creation of bank board bureau, capitalisation, de-stressing, empowerment, framework of accountability and governance reforms at state-run banks.

The proposed bank board bureau, which will replace the existing appointments board, will act as the new search committee.

Addressing a press meeting in the national capital on revamp of public sector banks, Jaitley said, ''We will also be explaining today a new policy where each bank will be monitored on the basis of key performance indicator''.

Jaitley further said that the recent initiatives taken by the government has helped fix some issues in PSU Banks.

Detailing the steps to be taken for revamping public sector banks, the finance minister said PSU banks have faced challenging situation in the past few years

But, he added that though the situation is challenging, there is no cause for panic as the government has from time to time been reviewing the health of these banking institutions.

The government now plans to monitor each bank based on key performance indicators, he said.

The government, he said, is also aware of the fact that sectors such as steel, power, highways, discoms, sugar are responsible for the stress in public sector banks.

There is a need to deal with the issues in these sectors, he said, adding that the government has taken some steps in the steel sector.

However, the problems of steel sector are on account of external factors, he said.

For the sugar industry, he said, the government has announced a package to help the sector.

On the issue of utilities like electricity distribution companies (discoms), he said, states need to take some urgent measures in place for discoms.

As part of revamping bank managements the government for the first time appointed two private bankers in public sector banks, secretary department of financial services Hasmukh Adhia said, adding that some vacancies of non-official directors in PSU banks will also be filled in over the next three months

He also said the government will soon release Rs20,000 crore for recapitalisation of banks.

Any divestment of government stake to further bolster banks' capital will be only after recapitalisation, he said.

The remaining Rs5,000 crore will be released in the fourth quarter, he added.

He also pointed out that Rakesh Sharma of Lakshmi Vilas Bank will be new MD & CEO of Canara Bank

The bank board bureau, which will act as a bridge between the government and the PSU banks, will be operational from April next year, he said

Also on the government's agenda is the strengthening of asset reconstruction companies, Adhia said, adding that the situation of stressed assets is not so bad as the government has managed to find out the pain points of various stressed projects.

On the management side, the government proposes to bring more flexibility on hiring of manpower for PSU banks. Also, it is proposed to make performance-linked bonus for bank management more generous, he said.