Finance Ministry may warn ‘laggard’ PSB chiefs

NEW DELHI: Chiefs of at least three staterun lenders may be hauled up for unsatisfactory performance as government plans to step up decision-making and send a signal to others. This will be done in consultation with the Banks Board Bureau ( BBB) that has been empowered to advise the government on extension of tenure and termination of services of board-level officials in public sector banks as well as financial institutions.

“Some bankers are not performing satisfactorily. They may be asked to pull up their socks or move out,” an official said, requesting anonymity.

“A final decision will be taken by the finance ministry,” he said without revealing the names of the banks.

BBB has also been tasked to build a data bank containing data related to the performance of banks and its officers.

“The idea is to get the best talent on board and ensure effective management of staterun banks and financial institutions,” said a finance ministry official, adding that removing the incumbent managing director may be the last resort. “We are not inclined towards removal; the aim is to nudge some of the laggards,” he said.

All the heads are appointed through the appointments committee of the cabinet, or ACC, and their removal may be a long drawn process, the official said.

BBB chief Vinod Rai had told ET earlier this month that the resolution of bad loans was not moving despite government and the Reserve Bank of India giving them sufficient comfort.

On Monday, finance minister Arun Jaitley announced another measure to help banks resolve bad loans. Banks can acquire assets of loan defaulters in steel, power and shipping sectors, and rope in state-run companies to manage them.

Gross non-performing assets of public sector banks surged to Rs 4.76 lakh crore in 2015-16 from Rs 2.67 lakh crore in the previous year. Most state-run lenders reported losses in the first quarter of this fiscal, mostly on account of increase in provisions to cover bad loans.The government has already linked capital infusion in public-sector banks according to their performance on various metrics, which include recovery and business growth.