The government is planning to refresh the corporate governance norms for State-owned banks. The move is being seen as a balance between an outright privatisation of banks (which is considered politically unfeasible), and the option to let them continue with a business-as-usual approach. Improving the quality of credit appraisal at these banks is among the likely changes. The governance reforms, as an official put it, would bring in measures to track the performance of the executive rank employees of the banks, intensively.
While the bailout has assuaged large investors about the immediate financial solvency of banks, there are doubts among them about how far the money would shore up the balance sheets of banks unless the quality of lending improves. The changes could also decide which way the Bank Boards Bureau would move. The government’s Indradhanush plan, the first phase of the bailout package, had also hinted that the Bureau would be tasked with helping these banks make necessary changes in their corporate governance models. The government believes that since the operational performance of banks means so much to the rating agencies, it makes sense to bring in wide ranging changes in the operations of banks. The finance ministry expects to drive the changes in its capacity as the largest shareholder in these banks. It is also holding negotiations with bank employees for wage revision, making it the right time to drive the changes.
[Source: The Business Standard]
