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Updated: April 8, 2014 18:51 IST

Finmin rejects RBI’s proposal to bifurcate CMD’s post in PSBs

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A file picture of RBI Logo. Photo: V.V. Krishnan.
The Hindu
A file picture of RBI Logo. Photo: V.V. Krishnan.

The Finance Ministry has turned down the Reserve Bank’s proposal to bifurcate the post of Chairman and Managing Director in public sector banks saying this position doesn’t enjoy absolute powers as is being claimed by some international experts.

Rejecting the RBI’s proposal to restructure the board of PSU banks, the Finance Ministry in a communication to RBI Governor Raghuram Rajan said “the board is headed by CMD (but that) does not mean that CMD enjoys absolute power and the board of the bank is subservient to CMD”.

The Finance Ministry said this in response to the Reserve Bank of India’s contention that CMDs of public sector banks enjoy absolute power along with boards.

The central bank, according to sources, had also said CMDs often dominate the board during their tenure and therefore it also recommended that the post of CMDs be separated to empower the board.

However, the Finance Ministry said the board is a collective decision making organ through which major decisions of the organisation are implemented and to say that CMD enjoys absolute power and disregards the decision of the board of the bank is not factual.

CMDs of public sector banks are thorough professionals, having long career in the banking sector and they are well aware of the issues to be tackled in this segment.

It can be noted that in PSBs, the top executive is designated as Chairman and Managing Director, with the exception of the largest lender State Bank of India, where the top honcho is the chairman and there are four managing directors with clearly defined executive roles under her/him.

The posts of Chairman and Managing Director in the private sector are held separately.

The RBI had set up a committee under the chairmanship of A S Ganguly in 2004-05 to study the issue of bifurcation of the post of Chairman and Managing Director in banks. The panel had recommended such a bifurcation.

Private sector banks in 2007 implemented this recommendation.

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RBI / the new Central Government should conduct thorough forensic audit
of the PSU banks whose CMDs are/were in the fray for the post of
Dy.Governor till recently. Atleast a Delhi based bank and a Chennai
based bank will shed light on the affairs in these banks.

from:  vc sekar
Posted on: Apr 9, 2014 at 22:23 IST

Right from the day Mr.Chidambaram took charge as Finmin, he is playing a
BOSS-ROLE whenever RBI is recommending anything worthwhile. It is a pity
that political idiots are playing over the best brains and practical
visionaries in the RBI, which is Bankers' Bank. Shri.Raghuram Rajan
several times remarked that INFLATION should be addressed first before
concentrating on CAD, but it has NOT yet enlightened Mr.C, His Highness
immersed in cocoon made by himself. At least ask/consult your
SeniorFinance Secretaries before opening your mouth. This is INDIA.

from:  K.T.JOSEPH
Posted on: Apr 9, 2014 at 16:07 IST

Why does the Finance ministry has a veto power over this issue when RBI is supposed to be the banking sector regulator. Clearly RBI needs to be given more power to be be implement its own suggestions

from:  satyam
Posted on: Apr 9, 2014 at 15:19 IST

Finance Minister would not agree to RBI suggestion because he has his men as CMD in PSB. Modi should remove all the CMD appointed by Mr Chidmabaram immediately after taking over as PM

from:  ashok
Posted on: Apr 8, 2014 at 19:35 IST
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