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Banking

With Tenure Set to End, Vinod Rai’s Banks Board Hints at Frosty Relationship With Finance Ministry  

While the BBB sought to move beyond being just an "appointments body", and forge an "organic relationship with the government", the finance ministry may have turned a deaf ear to its suggestions.

New Delhi: Banks Board Bureau chairman Vinod Rai has indicated that the functioning of organisation – which was meant to improve the corporate governance and performance of public sector banks – struggled to move beyond just being an “appointment body” in part because of the lack of engagement on the part of the Modi government.

In a 60-page report titled “Compendium of Recommendations” made public on Monday, just 11 days before the tenure of all the members of the Banks Board Bureau (BBB) is set to end, the BBB notes that it had “made recommendations on various issues in its remit”. However, the Centre may not have taken cognisance of the suggestions.

“The bureau has made recommendations on various issues in its remit, such as the ones made under the overarching theme of Governance, Reward and Accountability Framework (GRAF) in public sector banks. These recommendations made by the bureau seek to address the root cause of the challenges presently faced by the PSBs. The bureau is not aware of the progress made in this regard and there has been no further engagement with the government,” the chapter titled ‘Future Role’ states.

The report notes that in July 2017, a letter was sent to finance minister Arun Jaitley, that chalked out a “framework and roadmap” and reflected on the future role of the bureau.

Along with its numerous suggestions, the letter indicated that the members of the BBB requested a meeting with the finance minister to discuss these issues further.  A footnote appended to this point in the report simply states that “the bureau continues to await a meeting”, implying that the meeting still hasn’t taken place.

The July 2017 letter itself noted that there needed to be “greater organic linkage” between the BB and finance ministry if it was to “provide greater utility to the finance minister”.

“If the government does indeed desire to make the bureau address issues of governance around PSBs in a holistic manner and make its output effective, there is need for an organic relationship between Government and the Bureau,” the report, quoting consolidated extracts from the letter, noted.

“The bureau, as a body of experts on public sector banking, would be able to provide greater utility to the Finance Minister on matters relating to the governance and performance of PSBs, if there were to be greater organic linkage and dialogue with the finance ministry. At present the body is merely functioning as an appointment board,” it added.

Paper tiger

The BBB, which started functioning in April 2016 for a two-year tenure, was created to recommend executive directors and chief executive officers for government-owned banks. However, it has had little say in other matters such as consolidation among PSBs, their governance or resolution of stressed assets – all of which were envisaged by the P.J. Nayak committe, which mooted the idea of the BBB.

Even on the issue of appointments though, as The Wire and other media publications have reported, it has largely been a paper tiger, with the finance ministry continuing to play a dominant role.

The bank body’s ineffectiveness with regard to its core functioning became public in May 2017, when it was reported that veteran banker HN Sinor had resigned from BBB. While Rai was able to convince him to stay, the announcement indicated that Sinor was unhappy with the “inadequate progress that the recommendations of the bureau were making”.

Later, in October 2017, as The Wire exclusively reported, Omidyar Network India managing director Roopa Kudva resigned as a member from the BBB. Although the official reasons given for the stepping down was that Kudva had “increasing commitments at work, resulting in inability to devote time for the Banks Board Bureau, sources indicated that it was part of a growing disillusionment with the functioning of the transparency body.

While it was initially reported that the Modi government was considering winding up the BBB after the tenure of all of its members ended on April 1, 2018, itappears that the government has done a re-think and plans on setting the ball rolling for the appointment of new members.

It is unclear at the moment whether the tenure of any of the existing members, including Rai, will be renewed.

As senior financial journalist Tamal Bandyopadhyay put it in his analysis last year, if the government had a reform agenda for PSBs, the BBB could have been an “ideal vehicle to drive it”. However, another way of looking at it is that the “members of the bureau have taken themselves more seriously than they should have”.