Financial Services Secretary Hasmukh Adhia has made it clear that the next round of appointments of Managing Directors and CEOs in public sector banks will be from within the entities. “…This is the first experiment we have done for the top five banks. For the remaining banks that we are going to select, appointments will only be from the pool of Executive Directors,” he told BusinessLine in an interview. Edited Excerpts:
What will be the impact of Indradhanush, the seven-point revamp plan, on public sector banks three-five years from now?
When the intention is good, things do work out. We want to improve the status of public sector banks and see them function on commercial terms, having real autonomy.
The Government just wants to give them hand-holding, support, motivation, liberty, what ever they need, so that they are on the right course and do much better than what we expect.
On the appointment of MDs and CEOs and non-Executive Chairmen, the notification says it is subject to the outcome of a writ petition filed in the Supreme Court. Wouldn’t it have been better if you had waited for the court verdict?
The appointments had to be done. We were not in a position to wait. We could have avoided mentioning the court issue, but the court refused to give any stay order (Though it is clear that it might be dismissed). Since the case is going on, it was mentioned as a safety measure.
But what happens if there is an adverse verdict?
We do not expect any adverse order.
Don’t you think the move to appoint people from the private sector will de-motivate rank and file in PSBs as it will take away their opportunity?
The officers in the public sector banks can have a grudge, if we open the appointment of Executive Directors to the private sector. For these five banks we had given opportunities to both the public and private sector candidates came from both sectors.
We selected three from the public sector itself who were found suitable and two are from the private sector. This is the first experiment we have done for the top five banks
For the remaining banks, we are not opening it for private sector candidates. We are going to select only be from the pool of Executive Directors from public sector banks. So their promotion opportunities are retained.
What about the top post in SBI?
We have not thought about it yet. We will cross the bridge when we come to it. There are still two more years.
There is a general perception that banks are not transmitting revision in repo cut, while banks say that their cost of fund is high and they are facing competition from small savings. What are your views?
Does the RBI give full money to the banks so that entire rate cut is passed?
What percentage of funds comes from the RBI? Lending at repo rate is limited and that too is short-term money.
Revision of rate on small savings is not pertaining to my department but to the Department of Economic Affairs. But, they also have tough challenges. Because saving rate of the economy also has to be enhanced.
Earlier, it was 35 per cent of GDP, but now it has come down to 30-31 per cent.
What is the progress on the MUDRA scheme? When will MUDRA Bank start functioning?
MUDRA yojana means small loans we are going to give to small businesses up to ₹10 lakh… We are trying to augment the flow of these loans through commercial banks. We have also given bank- wise target and lending is happening.
Already 20 lakh people have been given MUDRA loan comprising an amount of ₹14,000 crore. This does not include MFI lending which is taking place. For MUDRA Bank, we are working on the legislation. The draft is ready and we will shortly be looking at the draft and finalising it and then we will take it to the Budget session.