The Finance Ministry’s revamp plan for PSU banks includes appointments of professional MD&CEOs and non-executive Chairmen at some large banks (conditional on a Supreme Court judgement) along with a commitment to have a functional Bank Board Bureau (BBB) by 1 April 2016. The reiterated capitalisation plan covers banks’ capital need for FY16 and FY17 under highly conservative assumptions but this could fall short if asset quality stress worsens or credit growth expands (relative to the strangely moderate assumptions). Oddly, the revamp plan has no new ideas to address asset quality issues. Whilst the Government is claiming that it will grant greater independence to these banks, the changes to compensation and hiring policies (at the mid-level) to attract specialist skills are unclear. Also, as before, PSU banks stay under the vigilance of CVC/CBI/RTI.
Thus, the PSU banks’ disparity relative to private sector banks is unlikely to close easily. On a relative basis, Bank of Baroda has received the most credible appointments for MD&CEO and Chairman
