Top echelons of bank industry will be meeting Friday in a Gyan Sangam or ‘Confluence of Knowledge’ meet in Pune to prepare a blueprint for reviving the ailing state-owned banks that are gripped with bad loans and high debt related issues. Speaking to CNBC-TV18 ahead of the meet, SBI Chairman Arundhati Bhattacharya applauds government’s effort to inititiate such a conclave wherein bankers can be heard and are free to share their concerns.
The most crucial issues expected to be raised during the two-day event include asset quality concerns, financial inclusion, human resources, consolidation, risk management.
Bhattacharya also believes banks need boards with good quality for better corporate governance and this must be brought to government’s notice. The banking industry needs more debt recovery tribunals and changes in bankruptcy law, she adds.
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Below is verbatim transcript of the interview:
Q: What are you expecting from this meeting in terms of the low hanging fruits, the easier ways to change in the way public sector undertakings (PSU) banks are governed?
A: At the meeting, I think for the first time somebody is asking the patient what is wrong with it. We have had a lot of people opining on what should be done and what is wrong with the public sector. The public sector banks themselves have never been asked. So I think that is the first major reaction that we had.
Feeling of delight at the fact that we ourselves get to speak for the first time and frankly because we are insiders, we actually know what is the pain and what could possibly be done. To that extent, this is a great initiative where we will ultimately be in a position to say what we need. Now if you ask me what are the areas that we are going to talk about I think the areas have been very well chosen by the ministry.
So we will be discussion stuff like HR, asset quality, risk management, capitalisation, financial inclusion and other areas like consolidation so all of these are subjects that are going to be discussed. To that extent, it is going to be pretty broad coverage.
Q: Would you ask for more debt recovery tribunals or for any changes in the law. Exactly what kind of help would you be requesting for?
A: Both of the things that you have talked about, we have already asked for them quite sometime back. Definitely, we need more debt recovery tribunals not only that we need more appellate tribunals as well.
Regarding the change of law we have also asked about that and it was the first thing that I had requested the new Finance Minister when he had taken office and he had met us, definitely change in law is required. We need a good bankruptcy law in India. So we have asked for change of law.
However, we also need to ensure its proper execution. Just recently Centre for Advanced Financial Research and Learning (CAFRAL) which is the research arm of Reserve Bank of India (RBI) they had a meeting of all the heads of debt recovery tribunals (DRTs), the presiding officers (POs) as well as people from the banks.
They have pointed out several things that could be done to make the process faster. So I think this collaborative form of working that we are seeing, this is a very welcome change. Hopefully, if all of us feel the need for change it will happen.
Q: The tenures of chairman is under discussion. The discussion is that they should be lengthened; will you be raising that as an issue?
A: This is something that we definitely need to ask for. Not only that, we have longer tenure for the chairman but also in respect of the very top echelons that when we know the dates of retirements people must be positioned early enough in order to ensure a proper taking over and handing over and that we do not have the kind of vacancies that we are seeing at this point of time.
Vacancies can be very disruptive and uncertainty is even worse so these things need to get taken care of and definitely it will be one of the things that will discuss.
Q: Will you ask for more lateral hiring and even if they allow it do you think it is possible partly because of union power? What HR issues will you highlight and how are you seeing them being answered?
A: Actually, we cannot hire beyond a particular point. So, we are cognizant of the fact being in the public sector we have to advertise every single vacancy. Then ensure that we go through a process which enables anybody who is interested to come in. So it is difficult right now to say what will be the solution for this. However, again this is one of the areas where definitely there will be a lot of discussion.
Let us see if we can come out at least if not across the board but at least if we are allowed a certain percentage of hires that can come laterally at market rates for regular employment then that will be a big step forward. So let us see whether we can come up with a solution which may help us and yet not be against the spirit of providing employment opportunity to all.
Q: The Nayak Committee had wanted to move away, repel the banking regulation act all together and move all banks under the Companies Act. Will you be raising it? This can mean a lot of independence for the companies, more independent directors. Do you expect it to be raised?
A: This suggestion is something that can only work in the medium-term. These also need something of a holding company if you got to set it up and move the banks away from the banking regulation act? It means scrapping several laws. Not only the Bank Nationalisation Act but also the SBI act and SBI Subsidiary Banks Act so it means replacing three acts.
Replacing three acts is not something that can happen in the short-term. It obviously needs a longer period of time. Definitely some amount of movement on this or at least we can try and ascertain the governments comfort with these ideas. This is something that definitely will be also discussed but it is not something that I see happening in this next one year.
Q: But do you expect the issue to get raised?
A: I am sure it will be raised.
Q: One of the big bugbears for public sector banks is political interference Bank. Political interference has certainly handicapped a lot of you bankers. Will that be bought up at all? Will you look for some buffers against it?
A: Frankly you know what kind of buffer would be there I am not too sure means what we are talking about over here. At the end of the day it is up to each of the banks to sort of stand up and do what is required to be done.
The biggest thing that can be a buffer is to have a board of very good quality. I think with that you will see much better corporate governance and that is probably something that we should aim for.
Q: What concrete do you expect from the meeting?
A: One last sentence what I want from this session is basically you know that itself is been given that we should be heard. And then once we are heard probably we would like to see action on some of the things that we point out. I don’t want to say one thing above the other, but I definitely feel that this is a great initiative because at least it gives us a forum to be heard and that itself is a major step in the right direction.
I also want to take this opportunity to wish all of your viewers the very best in the New Year, especially to my colleagues in the banking industry, and to my own colleagues in my own bank. A very happy new year to all of you and again as I said we all have our hopes which are pretty high for the coming year. I hope when we end the year we will be able to say that our hopes have all been met.