Structural changes have been suggested by the government to improve the performance of PSBs.
High level of non-performing assets (NPAs) and lackadaisical performance of public-sector banks (PSBs) is one issue, which the Central Government is trying to address today. It had announced a capital infusion of Rs 2.11 lakh crore to strengthen these PSBs.
But simply adding fresh capital is not going to result in the good performance of these PSBs. There must be structural changes in these PSBs to improve their performance. The human resources and risk management in the PSBs must be overhauled to improve their performance.
Working towards restructuring, the Government has suggested to bring PSBs to the level of their private counterparts by making provision for lateral entry from the private sector into the specialised verticals. The lateral entry provision will help attract top talent to the PSBs in areas of information technology, human resources and risk management.
It’s suggested that a major part of the senior management’s salary should be linked to profitability in the medium and long term.
Both the Government and the Banks Board Bureau (BBB) have suggested forming a remuneration committee and making boards more accountable by separating their management and supervisory functions.
To encourage the top officials to be responsible for the smooth growth of the bank, there is a suggestion that a major part of their salary should be linked to profitability in the medium and long term. It is also suggested to encourage competent senior personnel to continue at banks.
The Banks Board Bureau (BBB) has suggested that PSBs be professionally managed at par with the private players. Assessment of the board and directors of PSBs as per the Companies Act, 2013 is also suggested to encourage accountability.
The BBB recommends that all the PSBs should identify senior-level bank executives and groom them across functions, so that they can be managing directors and chief executives capable of leading the bank in the future.