The finance ministry has rejected the proposal by the Reserve Bank of India to separate the post of chairman and managing director in public sector banks. The ministry says in a communication to RBI governor Raghuram Rajan that the boards of the banks are headed by CMDs but that does not mean that a CMD enjoys absolute power and the board of the bank is subservient to CMD. The RBI had contended that CMDs of public sector banks enjoy absolute power along with boards and that the CMDs often dominate the board during their tenure and therefore it recommended that the post of CMDs be separated to empower the board. But the ministry said the board is a collective decision making organ through which major decisions of the bank are implemented and to say that CMD enjoys absolute power and disregards the decision of the board of the bank is not factual. The posts of chairman and managing director in the private sector are held separately.
