Indradhanush- a plan to revamp state-run banks

The Indian government has launched a sweeping action plan to revamp state-run banks, offering their management teams the promise of performance incentives including employee stock options (Esops) and introducing a new policy under which each lender will be monitored on key performance parameters.

This revamp will be the most comprehensive plan since nationalisation of banks in 1969. This would give banks the strategic space for adequate competitive positioning. The plan envisaged for revamp of PSBs is a bottom-up process, ensuring world-class quality and autonomy.

The plan includes:

• Appointments: The Government decided to separate the post of Chairman and Managing Director by prescribing that in the subsequent vacancies to be filled up the CEO will get the designation of MD & CEO and there would be another person who would be appointed as non-Executive Chairman of PSBs.
• Bank Board Bureau (BBB): The BBB will be headed by a Chairman and will comprise six other members — three government officials and three experts, two of which will be from the private sector. It will constantly engage with Board of Directors of all PSBs to formulate appropriate strategies for their growth and development.
• Capitalization: Govt. to infuse Rs.70000 crore capital into banks over the next four years and enable the PSBs to raise Rs. 1,10,000 crore from the market.
• De-stressing PSBs.
• Empowerment: Banks to be encouraged to take their decision independently keeping the commercial interest of the organisation in mind.
• Framework of Accountability: A new framework of Key Performance Indicators to be measured for performance of PSBs is being announced.
• Governance Reforms.

By: Vishal