The Hindu Business Line : Jalan moots 5 steps to strengthen banks

Dr Bimal Jalan, Governor, RBI, with Mr Dalbir Singh, Chairman-cum-Managing Director, Central Bank of India, and Chairman, Indian Banks' Association, and Mr K.V. Kamath, Chief Executive Officer and Managing Director, ICICI Bank, at the Banking Summit held in Mumbai on Saturday.

MUMBAI, April 5

DR Bimal Jalan, RBI governor, today prescribed a five-pronged strategy to further develop and strengthen the Indian banking and financial sector.

"The first priority is to build a competitive and open financial sector. I am in favour of free entry of players subject to certain regulatory requirements,'' Dr Jalan said.

"If you look at the Indian banking system, this has already been achieved to some extent with the increased number of banks competing for business and deposits with a broader range of products for the customers to choose from'', he said.

Second, Dr Jalan emphasised, is the need to put in place a regulatory system that matches up to international standards in respect of capital adequacy norms, income recognition, prudential norms and provisioning requirements. These norms imposed uniformly across all banks would establish accountability and bring credibility to the banking system, he said.

The third imperative measure would be to bring about a reduction in government ownership in the banking sector. While admitting the ownership issue is a critical one, Dr Jalan said, "Some of the problems in the ownership of public sector banks are equally relevant in the ownership of private sector banks as well''. However, he said, that there is a case for bringing down government ownership in some public sector banks and that he `fully endorsed' it.

Dr Jalan said, the issue is now with a standing committee that will identify a strategy for privatisation of public sector banks and the report is awaited.

The fifth point is the human resource policies of banks. Dr Jalan admitted that efficient HR management was particularly lacking in public sector banks. "The legal protection provided to public sector bank employees is antiquated and needs to be altered'', he said.

There is a need to introduce a HR management system, that will enable not only the selection of the right candidates but also provide them with appropriate rewards and facilitate their retention in an organisation, he added.

Dr Jalan also wants Indian banks to follow international best practices in corporate governance, in order to become world-class players.

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