Former RBI Governor Raghuram Rajan on Friday said government layers must be removed from the appointment of chief executives and board members of public sector banks.
At his book launch event, Mr. Rajan also expressed hope that there wouldn’t be any more surprises such as demonetisation that could stall economic growth.
The Banks Board Bureau was set up last year with the objective of appointing board members, including CEOs. In practice, the BBB conducts interviews and only suggests names to the government, which decides on appointments.
“We need to have... professional boards in banks, independent of government and having the ability to hire or fire a CEO,” he said.
“When we get there (independent bank boards), we will have truly created the distance between the government and the public sector banks. One indication that we have achieved that will be the day we can close down the department of financial services,” he said. The department of financial services in the finance ministry looks after the banking and financial sector.
Mr. Rajan, who ended his RBI term in September 2016, said the Indian economy had tremendous potential to grow but ‘what we lack is implementation.’ “We talk, talk and talk. We don’t do,” he said. He said there was no reason why the economy cannot grow at 9-10%.
Mr. Rajan had earlier said the short-term costs of demonetisation may outweigh long-term benefits.
