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Restarting the reforms

The government in a major policy shift in August 2015 had appointed private sector professionals to head two public sector banks – Bank of Baroda and Canara Bank – in pursuit of its desire to initiate the process of reforms in the public sector banking industry. The government had also picked up top private sector executives to be non-executive chairmen of these two banks. The perception then was that the government would continue with such measures and possibly other banks too would open up for professionals from the private sector. This did not happen. On the contrary, the earlier process of picking up heads from among the senior-most EDs of the banks continued. There were, however, signals that results are what the government wants when it shifted some of the heads of not-so performing banks and brought in performers to replace them.

There is apprehension that the move has been an experimentation. Possibly that is why the two CEOs were given short tenures. There has to be a reasonable period of time for any chief executive to prove his credentials. All the private sector banks would vouch for this. Secondly, a turnaround is possible only when there is continuity in the management. For example, when P.S. Jayakumar ends his term at Bank of Baroda in 2018 as per the mandate of the government, he would have followed a particular course, which his successor need not adopt, for he or she would have different priorities.

This is not a desirable situation.

There is another aspect too. While banks need to have competent professionals to head, management of new generation banking requires services of high caliber experts to head domains like ethics, marketing, investment, learning, big data and analytics, governance etc and these skillsets cannot normally be found from among the ranks. The way out is lateral or direct hiring. There are instances where such lateral or direct hiring has brought in results. State Bank of India engaged a CTO from outside and the bank could make technology leapfrogs in a matter of 2 years.

It is therefore necessary that CEOs of the public sector banks – whether they are from within the organization or brought in from outside – should have longer tenures to conceive strategy and implement it. Besides, staff in the public sector banks need to face the reality and ready themselves to accept talent from outside to be able to be competitive.

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